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Problems with unpaid rent after change of managing agent

flatHere is a question to the blog clinic from Kevin who is a landlord:

I am a landlord of three properties.  At the beginning of the year I transferred the management service from one agent to another.

One of the properties was occupied and the tenants had been paying the rent to the previous agent.  They were notified of the change of management in writing with directions that their rent should be paid to the new agent.

Basically, I have not received any rent for this property since February and I suspect that it has been paid to the wrong agent but they are not co-operating. They said they couldn’t help because they didn’t manage the property anymore, they asked for the request in writing and said there would be an administration fee. A letter was sent at the end of April but there has been no response.

No one can contact the tenants because the previous agent did not provide their contact details and they do not respond to letters.

So I have two questions:

1) Is it possible to issue notice for rent arrears even if I suspect the rent has been paid but to the wrong party?
2) Is the previous agent liable in any way if they have received rent but not forwarded it on?

I should also add that the new agent visited the property recently and there is evidence that it is still occupied.

You have two options here – a claim against the agents and a claim against the tenants.

1. Claiming against the tenants

So far as a claim against the tenants is concerned, it will to a certain extent depend on the wording of the notice they were sent regarding the change of agent.

This should have

  • Told them that your former agent is no longer authorised to accept rent on your behalf
  • Given details of the new payment arrangements with the new agent, and
  • Notified them that if payment is made to anyone other than your new agents after a specified date, this will not satisfy their liability for rent.

If after receiving such a notice they continue to pay rent to the old agent, then (unless the old agent forwards it on to you) I don’t see why you should not serve notice on them for rent arrears.

Paying the wrong person will not discharge their liability for rent, but this will only be the case if the notice they were served was clear and unequivocal on this point.

In any event you will not want tenants who fail to contact you to remain after the end of their fixed term so I suggest you arrange for service of a section 21 notice anyway.

I suppose one of the problems is that you don’t really know whether they are paying rent or not. The fact that the tenants are un contactable rather suggests that they may be failing to pay at all.

2. Claiming against the agents

Turning to the agents, their lack of cooperation is wholly inexcusable, and I suspect that they may be in financial difficulties. If the tenant has been paying rent to them, they are very much in the wrong if they have not forwarded this to you.

Where people or companies act as agent for a landlord they are under what is known as a ‘fiduciary duty’ which means that they have a very strong duty of care. This will continue after the end of the agency in respect of any payments received by them in respect of their agency work.

Indeed a court will almost certainly find that they are holding this money for you on trust, and that they are liable to account to you not only for the money paid to them in error, but also any profit they may have obtained from using this money.

I would suggest you write to them saying:

  • that you require them to provide details of any rent which has been paid to them which they have not paid over to you, and pay this over within 7 days
  • that if they fail to do this, you reserve the right to issue proceedings asking for an account of all money due to you
  • that you will be issuing a complaint against them (if they are a member of any regulatory body such as ARLA or the Property Ombudsman), or (if they are not a member of any such organisation)
  • that you will be reporting them to the local Trading Standards Office

The action you take after this will really depend on the response received from the agents and the tenants.

So far contact with the tenants is concerned, as they are being uncooperative, I suggest that all communications be delivered to the property by the agents personally and that they have an independent witness with them so they can prove that (for example) notices and letters were actually served on the tenants, if this is later denied.

Buffer

Important note. If you are reading an old post, remember that the law may have changed since it was written.




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4 Responses to Problems with unpaid rent after change of managing agent

  1. I couldn’t agree more, it is an utter disgrace that a)Disreputable agents haven’t been eradicated by judicious regulation of the industry and b)generally speaking neither the Police nor Trading Standards ever wish to become involved with a complaint against crooked agents. It is no coincidence that with the increase in the PRS came a corresponding increase in the number of rogue agents. According to Professor Michael Ball of Reading University in a report commissioned by the independent Council of TPO. Publish date: October 2012, It is estimated that some £23 billion is paid annually in rent, of which £6 – £10 billion is collected by agents on behalf of landlords. The FCA (ex. FSA) effectively regulate the flow of money via the banking system whose proponents are intermediaries so why hasn’t their remit been extended to the flow of money controlled by letting agents?

    The specific case you highlight here should not have arisen. I have to question why the newly appointed agent didn’t make it their business to ensure the transfer of rent payments took place – simply writing letters to a dilatory set of tenants isn’t good enough – there are other remedies; I agree not all of which may be available to the new agent but they should be recommending the issuance (ultimately) of a section 8 notice if they have been unable to secure a visit to the tenants and their rent arrears notices have gone unanswered.

    We are often asked by landlords to take over the management of tenancies/properties from other agents and among the first things we do having obtained the tenants contact details is to arrange to visit them with letters signed by their landlord instructing them to conform with the change of agent. We have encountered a few occasions where the previous agent has been less than helpful (or disappeared with security deposits)but this is where we have had to be belligerent (strictly within the confines of the law) and while this is unpleasant, we take our fiduciary duty towards our new landlords client very seriously.

  2. Tessa

    I have encountered this agent change problem many times and the answer is always the same, usually with the ex agent eventualy deducting whatever fees they deem appropriate for themselves before passing on any balances.

    They used to do this from deposits too, but now that is a thing of the past. In almost every case I have dealt with the ex agent got away with it mainly because the Landlord just wanted to get on with his life.

    This case has a less than usual angle, which is the lack of cooperation from the existing tenant. I agree with you Tessa this smacks strongly of the fact they haven’t paid the rent which is why the ex agent has not passed it on.

    All you can do Kevin is be as firm as you can be and spend whatever you are prepared to in order to recover the rents if they have been paid. It is establishing that fact which is the critical first step as that tells you who to pursue.

    I agree with Mike – the new agent should be doing far more.

  3. We have a portfolio of let properties we developed for ourselves and have now we have taken on the management of them ourselves rather than leave it to agents as we have been stung by exactly this sort of thing on more than one occasion. Bloody sharp practice IMHO verging on the criminal.

  4. I could not agree more. It is this type of practice that brings our industry into disrepute.

    I cannot think of any reason why a reputable letting agent would not wish to cooperate in the transfer of management to go smoothly. Not to mention that this will be the last impression the landlord will have of such agent.

    The money they are sitting on (if that is the case) it is not theirs and if they kept quiet about it all those months then yes, probably they may have problems.




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About the post author:

Tessa Shepperson

Tessa is a lawyer specialising in residential landlord and tenant law. She runs the Landlord Law website (now in its 12th 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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