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Who does the this tenant sue for the deposit?

housesHere is a question to the blog clinic from Sophie who is a tenant:

I have recently moved into my property and paid the deposit and first months rent followed by 2nd months rent to the letting agent.

The landlord never received the money and is suing the agent, who is not taking responsibility as they are now a limited company.

My deposit was not registered, I don’t have a receipt but just an email confirming I have paid my deposit. (And my bank statements showing a bank transfer) (although £1500 was paid by cash)

Who is liable for my deposit? Will I get it back and when do I sue or request it for it as I’m signed up to a years lease.

I have to say that I feel sorry for your landlord, Sophie.  The fact that you paid your rent to the letting agent protects you (so the landlord cannot ask you to pay it again) and the landlord’s only option of recovery is via the agents.

Likewise the landlord is liable to you for the deposit – even though you paid it to the agents.  The landlord is also liable for the penalty payment (which you can claim due to the failure to protect within the 30 days time limit) – even though this was the fault of the agents and not him.

So you can sue your landlord.  The question is can you also sue the agent?  This begs the quesiton – which agent?  The person who took the deposit or the limited company which has now taken over the business.

Lets take a look at the act.  Its says in s212(9)(a)

references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies

My view is that it is the person who was acting as agent at the time the deposit was paid who will be liable.  The person you paid the money to.

So if you bring proceedings for the return of your deposit and the penalty, it is that person who should be joined into the proceedings with your landlord.  Although I suspect you will have a better chance of recovery from the landlord, so it is the claim against the landlord you should concentrate on.

As to when you make the claim – you can bring it now if you want. Breach of the regulations entitles you to reclaim the deposit and apply for the penalty at any time after the 30 day time limit.

Reflecting on this case, I must say it sounds like pretty sharp practice to me if the agnet has indeed taken payments as agent for rent and deposit, and then refused to account for them on the basis that it is since incorporated.

I would be amazed if this agent is a member of any of the agent regulatory bodies, but a complaint can still be made to the local trading standards office.

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8 Responses to Who does the this tenant sue for the deposit?

  1. The Law also makes it clear that as with EPCs etc the Landlord always has the ultimate liability for any offence committed, in this case against the tenant re their deposit.

    All very unfortunate but it is a horse kicks dog, dog bites cat scenario;. Sue the Landlord and then leave them to sue the agent. Apart from anything else I’d imagine if you sued the agent and for some daft reason faiuled then this would prevent you suing the party that has the liability at law – the landlord?

    Why does changing to limited company status make the agent incapable of being sued? Threaten to sue the individual previous partner/sole trader under personal covenent instead?

  2. She should sue both the landlord AND the agent together. It does not have to be one or the other. Sorry, that was not made very clear.

    I don’t think moving the business to a limited company ends the agents liabily under the regs if the deposit was paid to the agent personally – but the agent presumably does!

  3. Just my humble thoughts – the person responsible for protecting the deposit is the person who received it – in this case the unincorporated agent.

    What legal personality did the original agent have – sole trader – partnership etc???

    It might be fun joining in the principle(s) of the original agency with any action against the (unfortunate) Landlord as a personal claim is more “mind focusing” than one against a company.

  4. Has the agent admitted receiving the deposit?

    Sorry to be cynical but this sounds a bit dubious to me-

    I don’t have a receipt but just an email confirming I have paid my deposit. (And my bank statements showing a bank transfer) (although £1500 was paid by cash)

    There have been very few successful deposit claims.

    Even fewer when a grand and half has been paid over in cash without a receipt.

    If the tenant has proof they withdrew £1500 in cash from the bank on the day it was paid, it might hold water.

    But if the tenant is claiming they borrowed it from Dave down the pub….

  5. Tessa I agree sue both but at the end of the day if the tenant cannot get the money out of the agent the Landlord will be liable whether the deposit was paid direct to them or to the agent on their behalf.

    If the agent cannot now be pursued for this particular debt because of some ohoenix like Svengali commercial chicanery then why waste time just go for the LL who probably has money and for sure is legally liable.

    Then leave them to go on the wild goose chase after the agent

  6. The original posters comment about the deposit and not having a receipt confusion seems to be her drafting and not her actual meaning. It appears that she did not receive a written receipt but the email records the payments made. The main issue raised was who could she sue. As HA 2004 S219 states the agent receives the money for the landlord and that the tenant can sue the landlord. As a very practical and mutual resolution the tenant may perhaps negotiate with the landlord that they accept liability for the deposit itself and forgo the penalty as long as the landlord then registers the “new” deposit. The tenant and landlord could work together and try and find out what resources the sole trader agent has eg car or house. That working may then create a good LL and T relationship for the remainder of the tenancy

  7. Good suggestions Colin but sadly the tenant does not need to negotiate with anyone it is the Landlord who needs to make all the running here as it is he that is liable to the tenant wherther or not they are successful in suing the agent.

    I doubt they will get anywhere with that I have seen some open and shut cases (aren’t they all now?!!) where one party has just stonewalled and the other has given up what was clearly a winning hand.

    I even have one on the go at the moment where an ex tenant would clearly win but because the other ex tenant is fearful of the amount of time that might be needed to pursue the case (Court appearances etc) is reluctant to get involved.

    If Sophie does negotiate I suggest it is for x2 the deposit as that is the minimum she would get if it went to Court.



About the post author:

Tessa Shepperson

Tessa is a lawyer and specialises in creating products and services which help landlords and letting agents learn and understand landlord & tenant law. For example, she runs the Landlord Law website (now in its 14th year) and is a director of Easy Law Training Ltd and Your Law Store. Tessa also sits on the Property Redress Scheme Council. When not working she enjoys reading, cooking and messing around on the computer. You can also find her on Google

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Tessa is an English lawyer specialising in residential landlord and tenant law.

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