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My agents refunded the deposit to my tenants mid term

housesHere is a question to the blog clinic from Sue who is a landlord

I recently moved management my rented properties to a new agent because of a poor level of service. One of them was in the middle of an active tenancy and the previous agent was holding some rent and the deposit (it was protected – one of the few things they managed to do correctly).

When I gave the agent notice that I was moving my properties, they unprotected the deposit and rather than forward it to the new managing agent, they returned it (along with the non forwarded rent) back to the tenants.

The new agent has contacted the tenants and although have agreed to repay the rent, they will not repay their deposit unless we prove that they have to.

Is there any way we can make the tenants repay?

I expect the agents refunded the deposit money to the tenants because they feared that they might be at risk (being the people the deposit was initial paid to) if the new agents failed to protect it.

The only way I can think of, to get the tenants to pay the deposit, is to serve a section 21 notice and say that their tenancy will not be allowed to continue unless they pay the deposit money back to your new agents.

However if they were going to leave anyway at the end of the term, this will not help you.

If you suffer any financial loss through not having a deposit you may have a claim against your old agents as it is their fault that you do not have a deposit.

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4 Responses to My agents refunded the deposit to my tenants mid term

  1. If the old agent’s concern was the new agent not protecting the deposit, they could simply have opened an account with the DPS in the landlord’s name and deposited the monies therein (re-issuing prescribed information etc along the way). This sounds like negligence by the old agent; the landlord should insist on restitution.

  2. The agent should have continued to protect deposit until they have confirmation that the deposit has been re-protected. They certainly should not have given it back to the tenant without your knowledge.

  3. The old agent is clearly at fault under his obligation to safeguard the clients interest and as such has breached the terms of their landlord agreement. You can take action on the agent even if the tenants do pay the deposit now for exposing you to potential risk!!

    Chet London… Legal exec.

  4. Jamie T and Mike White are 100% correct and I’m surprised that you make such excuses for the agent Tessa. They have clearly acted incorrectly and my guess is in a fit of pique at being dis-instructed. I have seen scores of cases like this, though usually it is the reverse scenario and the old agent won’t part with the deposit or rent etc!!
    The whole question here is whose authority did they act on, or whose best interests, to which the answers are respectively no-one’s and their own. It’s not just a matter of lack of knowledge on the Landlord’s part, it is lack of authority for the agent to act.
    Mike is quite right there is a system available to agents to open a DPS account in the Landlord’s name, and then transfer the deposit across from their account.
    However here is an interesting question. I am no expert on getting the money out of DPS, but surely the form has to be signed confirming it is to be released to the tenant – but surely only at the end of the tenancy. This tenancy has not ended.
    The agent has, for whatever reason, acted purely in their own interests and at the same time against their client’s. Dangerous combination hopefully they are members of some meaningful regulatory body and above all TPO – he’d love this case.

    My advice would be to threaten to sue and leave the agent to get reimbursement from the tenant who they should never have paid in the first place.



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

The Landlord Law Blog from Tessa Shepperson

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

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The purpose of this blog is to provide information, comment and discussion. Although Tessa, or guest bloggers, may from time to time, give helpful comments to readers' questions, these can only be based on the information given by the reader in his or her comment, which may not contain all material facts. Any comments or suggestions provided by Tessa or any guest bloggers should not therefore be relied upon as a substitute for legal advice from a qualified lawyer regarding any actual legal issue or dispute.

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