Unprotected Deposit, advice needed

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    Unprotected Deposit, advice needed

    Dear Members,

    I would really appreciate any advice you may be able to offer. I have spent a long time browsing through this forum for similar circumstances and other various websites. Please see the information below:

    Q1 – Where is the rented property located England

    Q2 – What type of Tenancy Agreement (TA) Originally 6 month AST joint tenantcy agreement. Since this there are two tenants each paying rent separately with an "oral tenancy agreement". One of these tenants is the original tenant and the other is new.

    Q3 – What date did current TA start October 2014

    Q4 – How long was initial fixed term 6 months

    Q5 – the TA states that rent is per calendar month on 28th

    Q6 – Did the TA require a tenant damage deposit to be paid? Yes, in October 2014

    Q7 – If your query relates to a notice for repossession from the landlord (a Section 8 or Section 21 notice) or a tenants's notice to quit to the landlord, please provide the exact date the notice was sent/received. Section 21 issued 12/2/2107

    Q8 – Does the landlord live in the same property as the tenant: No

    I had an original AST arranged with Mr A and Mr B for 6 months. Deposit was taken jointly as Insured tenancy scheme. After approximately 1 year Mr B moved out of property ( deposit returned in full) and new tenant, Mr C moved in. New new tenancy agreement was signed, instead I foolishly entered into an Oral Agreement as Mr A and Mr C were known to me.

    The deposit insurance lapsed after 6 months and I failed to renew meaning I now have an issue over " unprotected deposit".

    Fast forward to this year. After much annoyance from the tenants and my ability to manage the property (others are managed by letting agent as my job is more than full time) I decided to ask tenants to leave. I had a conversation with both in person and stated reasons why and issued section 21 notice. Tenant C has no issues as moving onto new property. Tenant A is where the issues begin.

    A week before moving out date tenant asked for confirmation of deposit protection scheme. I looked this up ( even though he had certificate I gave him in October 2014) and found it had expired. I therefore refunded him the full deposit (prior to move out date) as he told me he needed it for new place.

    Tenant A is now raising issued so wanted to check:

    1) is section 21 invalid due to the deposit not being protected?
    2) could the tenant now make a claim for penalty as deposit was not protected?
    3) could he do this via small claims as I have now returned deposit or would he need to take this to court?
    4) to make this court claim would both tenants have to go to court as 1 does not wish to as he now counts himself as my friend? I read that as joint tenancy all tenants must be claimants?
    5) would I have to serve him notice again now Deposit has been returned
    6) what about my new tenants who are meant to move in tomorrow? I feel terrible as they will be effictvle homeless if he refuses to leave?

    I understand this has come about due to me being negligent in my duty to protect the deposit however I feel tenant A is trying this as he has not found anywhere to live and wants some "free money"

    7) how would you recommend I proceed?

    Thanks again and apologies for the long post, I wanted to include all the facts!

    #2
    Originally posted by Simon Nottingham View Post
    I had an original AST arranged with Mr A and Mr B for 6 months. Deposit was taken jointly as Insured tenancy scheme. After approximately 1 year Mr B moved out of property ( deposit returned in full) and new tenant, Mr C moved in. New new tenancy agreement was signed, instead I foolishly entered into an Oral Agreement as Mr A and Mr C were known to me.
    Did you return the full deposit to Mr A and Mr B?

    Did you take a new deposit for Mr A and Mr C?

    Comment


      #3
      Originally posted by Mrs Mug View Post
      Did you return the full deposit to Mr A and Mr B?

      Did you take a new deposit for Mr A and Mr C?
      Thanks for your response.

      I returned the full share of his deposit to Mr B.

      Mr A was staying so just retained (without deposit protection as it had expired)

      Mr C did not supply a deposit as he is a friend.

      No new tenancy agreement either, just oral contract.

      Comment


        #4
        Regarding getting tenants out, I suggest that you persuade Mr C to give notice to end the tenancy, then status of S21 does not matter.

        Notice by Mr C also ends the tenancy for Mr A.
        If tenants do not leave by notice date, then you have recourse for double rent under Distress for Rent Act 1737, section 18.

        Tenant A can claim for failure to protect deposit.
        He may be able to claim for 2 breaches: first for the initial tenancy; second for the Statutory Periodic tenancy that later arose (but I do not know the position for the case where there is no written tenancy agreement).

        As you have been stupid and entered a new agreement without having vacant possession of the property, I feel that you should compensate the "new" tenants (but I do not know the legal position - probably depends on whether or not the agreements have been signed).

        S21 is not valid if you held an unprotected deposit at the time the notice was issued.

        Comment


          #5
          I'm still a little confused but the original tenancy agreement was signed and deposit correctly protected?

          Deposit returned at end of tenancy but the remaining tenants half of the deposit was not reprotected? Or did it become unprotected 6 months prior?

          If his tenancy went periodic after 6 months that is your first breach. You are liable for penalty on every new contract.

          You could dispute a further penalty claim on the new oral joint tenancy.

          I'm not sure where you will legally stand but in the absence of a written contract, he will not be able to prove a deposit applied.

          I would personally argue that your breach was in not returning his deposit when you returned the other half to the joint tenant. You infact should have returned the whole amount to whoever was lead tenant. In the absence of a lead tenant it should all have been divided and returned equally.

          Tenant c will hopefully support you that no deposit was demanded on that tenancy as he did not pay one.

          Mdeb gives sound advice that you should ask tenant c to serve notice. This ends the tenancy for all and not only can you charge mesne profit (double rent) but you will then not need to rely on section 21, which is invalid if issued before the deposit was returned.

          How much was the deposit? You can counterclaim for your losses including eviction costs if it gets that far.

          You should never ever arrange a new tenancy until the current tenants have gone. You can be sued also by the new tenants if they have signed an AST and paid deposit etc.

          I would go pay this tenant a visit and offer him 3 times his deposit amount to leave tomorrow.

          Advise that in the absence of any written contract he is unlikely to do better in court.

          Good luck

          Comment


            #6
            Had tenant b been the lead tenant you could have returned the full deposit to him when he left.

            Had this tenant confirmed with that person that you didn't do just that?

            Comment


              #7
              Originally posted by Wright76 View Post
              I'm not sure where you will legally stand but in the absence of a written contract, he will not be able to prove a deposit applied.
              1. That is dishonest; never the best approach. The facts are that a deposit was retained.
              2. Without a signed receipt, landlord cannot prove that original deposit was returned.

              Comment


                #8
                are you sure you didn't return the full deposit to tenant b and not take another from tenant a?

                You may have just returned his share again to help along in the move and unwittingly remembered this deposit had already been dealt with?!!!

                Comment


                  #9
                  It is only dishonest if it is wrong!.

                  In order to claim a penalty a tenant must provide a copy of their AST and prove a deposit was taken.

                  In the absence of a contract they can't do that. Landlord deserves a penalty for the original breach but susequently claims can be legally contested.

                  When awarding a penalty, it is decided what should have been done and wasn't. Landlord is guilty of not returning deposit timeously. I doubt he could agree to take a deposit from one half of a joint tenant only and therefore the deposit applies to the first tenancy only.

                  Comment


                    #10
                    Originally posted by Wright76 View Post
                    It is only dishonest if it is wrong!.
                    see post at:
                    Originally posted by Simon Nottingham View Post
                    I returned the full share of his deposit to Mr B.

                    Mr A was staying so just retained (without deposit protection as it had expired)

                    Comment


                      #11
                      OK so that covers he didnt return it all to tenant b.

                      It doesn't prove he is liable for a penalty on the new joint oral tenancy. There is nothing documented that a deposit applied to that tenancy and he is guilty of not returning it only.

                      I'm sorry but whilst I agree landlords should be penalised for evading the law and purposely not securing deposits, multiple claims for the same property when they have suffered no loss should not be allowed.

                      If there is a legal way to avoid multiple claims then a landlord should always use it. Tenant needs to provide a copy of tenancy agreement and proof they paid a deposit before a penalty is awarded. They can provide that for the first tenancy only. A penalty will apply when that tenancy went periodic.

                      Another OP sought legal advice recently and was advised that it does not take agreement from both tenants to claim. If that is the case then what's to stop tenant b making negotiations and claiming first? Also the penalty can be claimed by the person who physically paid the deposit and who's to say that wasn't tenant b either?

                      Comment


                        #12
                        Thanks for all those responses, very kind to have all your input!

                        Answers:

                        The original deposit for Mr A and Mr B was protected for 6 month term which expired (insured scheme). Mr B had his returned to him in full via BACS to his account when he left. I still had possession of Mr A deposit which was returned yesterday via BACS to his account.. I didn't protect his share again just returned it yesterday in full. Mr C did not provide a deposit or have a tenancy agreement and will support me on this. Tenant B will support me that his deposit was returned

                        Update: I have met with tenant Mr A tonight. Mr C is moving out tomorrow but Mr A is refusing to leave stating that the section 21 is invalid and it not convenient for him. He has stated he is willing to serve notice himself for 2 months or I can serve him with a valid section 21.

                        I have agreed that the new tenants can come live with me rent free until they find a new property which they have agreed too, although they have no signed contract or deposit paid morally this feels correct.

                        The issue is now Mr A and how best to proceed. His deposit paid in October 2014 has been returned to him yesterday. He told me all he wants is to stay until the 4th July. I have offered to agree to this on basis he signs an agreement basically stating he will not sue for unprotected deposit. He has refused this for the reason "you may not keep up your end of the bargain". I feel that given this he will try and sue me regardless.

                        1) would you agree, as per your suggestions, that I ask Mr C to sign a notice to leave property (which he is vacating tomorrow)? How much notice must he give minimum? Ie could he give one days notice? Is this the case even though these is no written tenancy agreement in place? If mr C gives notice can't Mr C just refuse to move out again at end notice point? Although he will be liable for double rent he could just refuse to pay and then I need to take him to court?
                        2) now that I have returned his deposit (from October 2014) how will he be able to claim against me and what actions should I be taking?
                        3) if I antagonise him and he destroys property etc what recourse do I have now I no longer hold his deposit and inventory was 3 years ago? Should I try and appease him by letting him stay?
                        4) because of the oral contract you feel it is unlikely he will have a claim before the first?
                        5) if he stays can I create new tenancy agreement or ask for a deposit until 4th July?
                        6) now I have returned the deposit I understand he cannot go through small claims so this means a serious court case. Should I be taking legal advice at this stage?

                        Thanks again, I understand this is due to my fault by feel the tenant is exploiting me and I am getting very stressed!

                        Comment


                          #13
                          Originally posted by Wright76 View Post
                          OK so that covers he didnt return it all to tenant b.

                          It doesn't prove he is liable for a penalty on the new joint oral tenancy. There is nothing documented that a deposit applied to that tenancy and he is guilty of not returning it only.

                          I'm sorry but whilst I agree landlords should be penalised for evading the law and purposely not securing deposits, multiple claims for the same property when they have suffered no loss should not be allowed.

                          If there is a legal way to avoid multiple claims then a landlord should always use it. Tenant needs to provide a copy of tenancy agreement and proof they paid a deposit before a penalty is awarded. They can provide that for the first tenancy only. A penalty will apply when that tenancy went periodic.
                          OK. I can see that there could be that argument.

                          However, following Superstrike, I can see that a judge could decide that as the deposit was not returned shortly after the end of the first tenancy, then the landlord had retained it as a deposit for the second tenancy (he may be deemed to have received it for the second tenancy).

                          I can also see that there could be an argument that the landlord was waiting for the tenant to request repayment of the deposit for the first tenancy and that no deposit was asked for for the second tenancy, with witness Mr C. The OP states that he returned the deposit recently because the tenant asked for it.


                          Thank you for educating me on this subtlety of interpretation.

                          Comment


                            #14
                            Originally posted by Simon Nottingham View Post
                            1) would you agree, as per your suggestions, that I ask Mr C to sign a notice to leave property (which he is vacating tomorrow)? How much notice must he give minimum? Ie could he give one days notice? Is this the case even though these is no written tenancy agreement in place? If mr C gives notice can't Mr C just refuse to move out again at end notice point? Although he will be liable for double rent he could just refuse to pay and then I need to take him to court?
                            2) now that I have returned his deposit (from October 2014) how will he be able to claim against me and what actions should I be taking?
                            3) if I antagonise him and he destroys property etc what recourse do I have now I no longer hold his deposit and inventory was 3 years ago? Should I try and appease him by letting him stay?
                            4) because of the oral contract you feel it is unlikely he will have a claim before the first?
                            5) if he stays can I create new tenancy agreement or ask for a deposit until 4th July?
                            6) now I have returned the deposit I understand he cannot go through small claims so this means a serious court case. Should I be taking legal advice at this stage?
                            1)It is probably a good idea to get Mr C to serve notice to end the tenancy. The law says something like "not less than one month notice ending on the last day of a rental period". However, that means that a landlord cannot reject such a notice; it does not preclude a shorter notice ending on any day, if the landlord is willing to accept the notice.
                            If it was a sole tenant, then there would be no problem with 1 day notice.
                            As it is a joint tenancy there may be judgement that affects this, and a judge may determine that it is unfair.

                            Mr A always has the option of not leaving until you have a court order and bailiffs at the door, but he will have a judgement against him.

                            2) If you can argue successfully that there was no deposit for the second tenancy, then the S21 is valid and can be pursued.
                            I am not sure of the position, but it is likely that Mr A has a claim that you held an unprotected deposit for the first tenancy, so could seek damages through the courts.

                            3) If he damages the property, then you have recourse through the courts.

                            4) I do not understand the question.

                            5) Under no circumstances create a new tenancy. That would give him 6 months security of tenure. You should only take the rent agreed for each period.

                            6) It seems to me that you have reached the stage where legal advice is desirable, giving them the arguments put here about 'no deposit for second tenancy' for their consideration.

                            Comment


                              #15
                              I'm not saying the defence would work but with the onus of proof on the tenant it is a plausible defence and worth exploring.

                              To the OP, you cannot have him sign away his right to sue you. That will not work and he could still continue to seek the penalty regardless of anything you draw up.

                              Another way to look at it in the absence of any written contract with the last two tenants is that their oral contract were individual and not joint. Did they have their own rooms and could you plausibly have given them individual agreements? Although this would prevent you accepting tenant c notice to end the tenancy for both, it would mean you definitely only have one breach from when his tenancy went periodic as no new tenancy was given?

                              The tenant has 6 years to claim and I have no doubt that when he eventually moves out, the first thing he will do is make a claim.

                              If it were me I would be making a formal agreement with him now as an out of court settlement. 3 X his half of the deposit in the form of free rent maybe?. If he goes to a no win no fee solicitor it will cost you thousands in their fees alone. The issue has been raised now and is best dealt with ASAP.

                              Comment

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