Advice about withholding advanced rent following tenant notice

[knitwear]

Hi, first post here and looking for some advice on behalf of another. Any advice gratefully received!

A tenant is on an AST that started in 2008. The initial period of six months expired and the tenancy has proceeded on a monthly periodic basis since.

At the start of August 2013 the tenant offered 12 months advanced rent to the LL. This offer was a goodwill gesture on the tenant's part as she had earlier tried and failed to raise a mortgage when the LL offered to sell the property to her.

LL gave a written receipt for the advanced rent, and said that he would return any rent overpayment made, if during the 12 month period he needed to sell to someone else, or if the tenant wanted to try and raise a mortgage again, that any overpayment would be returned by way of a deduction from the purchase price at the point of sale.

The LL did not vary the tenancy in any way (i.e. it still proceeded as a periodic tenancy with the rent due on a monthly basis using the same terms as the original AST)..

Now three weeks later and the LL has decided that he needs to market the property. The LL informs the tenant who has asked about the advanced rent she has paid, namely when the LL will return it. The LL has pointed out that he will return any advanced rent owing at the point he serves notice on the tenant to vacate (i.e. when the LL has a proceedable buyer in place and is comfortable that they can remove the tenant in time for the new buyer to complete).

The tenant has asked if the reverse applies – i.e. if she serves notice on the LL, will she get any overpayment back. The LL has told her no, because the agreement under which he accepted the 12 months advanced rent specified that he would only return over-payment in the event he sold either to the tenant or another person.

The tenant has told the LL she is seeking legal advice over this issue and in the meantime will not permit access to the property for the LLs estate agent to measure up and take photographs and so forth. There is a clause in the tenancy agreement which permits the LL access in the final two months for prospective buyers, but the LL doesn't want to serve notice on the tenant now because to do so would mean having to hand back all her money which he has invested elsewhere.

My questions:

1) Can the LL legally withhold money if the tenant serves notice, and if the answer is no when should the LL return it?
2) Can the LL legally gain access to the property for his estate agent before serving notice?
3) Is the clause I mentioned above enforceable – i.e. if the LL serves notice does the tenant have to agree to access?

[Interlaken]

3. The tenant does not have to agree to any access whatsoever. Attempts to enter the premises could be seen as preventing her 'quiet enjoyment of the property' for which she has paid.
2. As above. Tenant will argue harassment in court.
1. What was the exact wording of the agreement verbal or written when the tenant paid 12 months upfront? he said/she said is not accurate enough.

[knitwear]

Thanks for the reply - much appreciated.

The exact wording is as follows.

Dear

RE: Property address

This is to confirm our agreement made earlier today, that you have agreed to make an additional payment of £XXXX to me. This is an advance payment for rent due from 1st September 2013 for the next eleven months. If during this period either I sell the property to another person or you purchase the property from me, then any overpayment will e returned or set-off against the purchase price.

Yours sincerely

Signed by LL

My own lay view is that this agreement cannot replace the rights of tenant and LL as set out in the tenancy agreement. Namely that the tenant is able to serve notice upon the LL at any point, and as long as said notice is served correctly, bringing the tenancy to an end.

Since the tenancy agreement by implications states that rent need only be paid while the tenancy agreement is in place, there can be no legal basis by which the LL can withhold the advanced rent once the tenancy has finished.

[Snorkerz]

Why does tenant want her money back? Her tenancy is not affected by the sale of the property.

[Interlaken]

This agreement was very much in favour of the landlord and probably would be considered so by a court. I agree with your thoughts on the rights of the tenant.

An interesting situation would be where the tenant refuses to allow viewings or indeed vacate the property so a Section 21 and court order followed by the bailiff may have to be sought to gain possession- this could well take months but maybe not 11 months.

[dominic]

Thanks for the reply - much appreciated.

The exact wording is as follows.

Dear

RE: Property address

This is to confirm our agreement made earlier today, that you have agreed to make an additional payment of £XXXX to me. This is an advance payment for rent due from 1st September 2013 for the next eleven months. If during this period either I sell the property to another person or you purchase the property from me, then any overpayment will e returned or set-off against the purchase price.

Yours sincerely

Signed by LL

My own lay view is that this agreement cannot replace the rights of tenant and LL as set out in the tenancy agreement. Namely that the tenant is able to serve notice upon the LL at any point, and as long as said notice is served correctly, bringing the tenancy to an end.

Since the tenancy agreement by implications states that rent need only be paid while the tenancy agreement is in place, there can be no legal basis by which the LL can withhold the advanced rent once the tenancy has finished.

The LL needs to tread very cautiously here for a couple of reasons:

1. there seems to be an implication that the advanced rent approximates to a security deposit (i.e. it is security for T staying in the property for 12 months) and, if it falls within the definition under the HA 2004, it should have been protected.

2. Stating that the overpayment is non-refundable on the tenancy being ended by the tenant through a notice to quit is tantamount to saying that it is not 12x monthly rent paid in advance, but yearly rent paid in advance. Whether this would be characterised as a new 12 month fixed term, or a yearly periodic tenancy, I do not know, but either way it will affect severely how much notice T is entitled to in the event the LL finds a purchaser who wants vacant possession. He may not be able to get T out before the 12 months are up.

[knitwear]

Why does tenant want her money back? Her tenancy is not affected by the sale of the property.

Please ead my post again: the tenant hasn't asked for her money back, she is merely seeking to clarify the LLs position in the event she wants to give notice - which of course she's entitled to do.

An interesting situation would be where the tenant refuses to allow viewings or indeed vacate the property so a Section 21 and court order followed by the bailiff may have to be sought to gain possession- this could well take months but maybe not 11 months.

Yes that's an interesting observation. However the LL is stuck because serving notice means returning the Tenant's money which LL has invested - hence why LL desires to keep tenant in place until sale, which in itself seems to go against common sense if you're a LL trying to sell a property - but there you go.

The LL needs to tread very cautiously here for a couple of reasons:

1. there seems to be an implication that the advanced rent approximates to a security deposit (i.e. it is security for T staying in the property for 12 months) and, if it falls within the definition under the HA 2004, it should have been protected.

Yes that's true. Again LL options seem limited according to my research here on this site - if money isn't protected then no S21 can be served, if it is protected then it probably creates a Premium Tenancy given the value in question.

2. Stating that the overpayment is non-refundable on the tenancy being ended by the tenant through a notice to quit is tantamount to saying that it is not 12x monthly rent paid in advance, but yearly rent paid in advance. Whether this would be characterised as a new 12 month fixed term, or a yearly periodic tenancy, I do not know, but either way it will affect severely how much notice T is entitled to in the event the LL finds a purchaser who wants vacant possession. He may not be able to get T out before the 12 months are up.

Yes this is another interesting take on the problem.

Essentially LL wants to have his cake and eat it. By my understanding he can't by implication tell his tenant that she must stay a full year less she lose her money, while at the same time state he will serve notice on her as soon as he has a proceedable buyer. The concepts seem to me mutually exclusive.