A tenancy deposit problem
I have received the following email from one of our readers:
My boyfriend and I moved into a 7 person flat share beginning of Nov 2008 where we were advised by the tenant moving out that there had not been a lease agreement with the Landlord via the letting agents for a while. It had expired and the agents hadn’t renewed despite the tenant asking. Anyway they said it worked for them to not bother with a new lease as the turn over of tenants was fairly regular so they started a system that a new tenant coming in just paid the tenant leaving the bond.
I have been told by the agency who we rent the property through that due to a government law bought out in April 2007 regarding deposits they would be unable to transfer the names from tenants that were on the lease at the time to my name therefore leaving me in a position where I will not be able to get the deposit back should there be a situation where we need to leave and are not replacing out selves with another tenant. Is there anything i can do about this?
This is not the first time I have been consulted in a case where ‘tenants’ move in and move out of a property without signing any form of tenancy agreement, often where the original tenants who signed the tenancy agreement have long gone.
Are they tenants or lodgers?
It raises a number of legal problems. If the original tenants are still living in the property, the incoming occupiers probably have the status of lodgers. However what is the situation when all the original tenants have left? You can’t really have a house full of lodgers under a tenancy where the tenants are no longer there.
Here are two suggestions –
- the occupiers have an oral tenancy, or
- there has been some sort of implied assignment
I would favour the oral tenancy argument, perhaps on the basis that they have a tenancy of their own room and shared use of the common parts. What do you think?
What about the deposit?
And what is the situation regarding the deposit? If this was protected (and it may not have been) it would have been protected with one of the three tenancy deposit companies, under the names of the original tenants. Is there any procedure whereby it can be paid out to the current occupiers? The original tenants won’t be interested as they will have been repaid by the incoming occupiers.
My advice to both landlords and tenants, is never allow this sort of situation to develop. It is a lazy approach to letting which benefits neither party, and which can be very prejudicial to either.
A tenancy deposit problem with a twist. I describe it in those terms because this is probably not a lodging agreement because the occupiers still have exclusive possession of at least one room and can exclude the landlord. An oral tenancy is likely but what strikes me is the peculiar arrangement whereby the outgoing tenant negotiates with the incoming tenant. It is unclear what part, if any, the agent or landlord has to play, but as the the original tenancy has not been brought to an end by the tenants or landlord, it is still running and the additional tenants are possibly a species of mesne tenants. The outgoing tenants, or mesne landlord as the case may be, would have the obligation to protect the deposit.
On Tessa and Stephen’s point about an oral tenancy and to also illustrate the point that sometimes there are situations that don’t quite fit a strict legal interpretation……
I have a client at the moment where her friend held an Assured Shorthold Tenancy, which then lapsed into a periodic tenancy (in other words the original 6 month fixed term expired but the landlord didn’t issue a new agreement). during her time there she took in her friend, my client, and let her have one of the rooms without the landlord knowing about it. my woman has lived there for the past 2 years paying rent to the tenant, effectively, as her resident landlord…..with me so far??????
the tenant moved out, leaving her friend in residence. The landlord has, what we term in housing law….”The right hump” and says that she is nothing to do with him so he has removed the toilet. The 7 month’s pregnant woman has to go to the nearby MacDonalds when she needs to ‘Go’, What is her status?????
I am not taking the ‘oral agreement’ argument but take the view that although she has entered the property with permission she is, in the landlord’s eyes, an unauthorised occupant. My advice is that the landlord still needs to get possession, but that my client has no defence. (please dont go down the road of her being homeless on basis of ‘Unreasonable to remain’, that’s a whole other story)
This case is a wonderful illustration of the grey areas of housing law. It always has been more than just a complex game of monopoly and I am quite happy to be persuaded that my view on it is wrong.
As I always point out to my training students ‘the housing law encyclopaedia is 2 feet thick and weighs 23 pounds’ and the minute you give someone the keys to a property you are stepping into those 6 volumes. And yet so many people treat letting as a casual way of quietly investing….it doesnt work that way.
ON the subject of the deposit, well these arguments just roll and roll. Check out the latest court cases on Nearly Legal from yesterday
http://nearlylegal.co.uk/blog/2010/06/tenancy-deposits-a-novel-argument-on-hold/
With your situation Ben, there are two alternatives. One is that the tenant (A) is still in ‘occupation’ as she has not given vacant possession and that you need to get possession under s21/s8. Here A will be named as defendant.
The other is that the person in occupation/lodger (B) is there without the landlords license or consent and is therefore a squatter (in which case the landlord could use my squatters kit http://www.evictingsquatters.co.uk). Here B will be named as defendant.
The answer will generally depend on whether the A has successfully ended her tenancy or not, and if it is ended, whether this was by the landlord accepting a surrender or not. Ie is the landlord bound by any sub tenancy/license to B, or has it ended with the end of A’s tenancy (if indeed it has ended) ….
On the original question, sadly I think I’d have to fall back on ‘need more information’, specifically on the LL/Agent involvement in this rotating process. By the sound of it, I’d agree oral tenancy is most likely, the original joint tenancy (if it was such) having been ended by surrender and replaced by individual tenancies of part.
The deposit issue is trickier. If it was protected under the name of a previous tenant, then it is only that (ex)tenant who can authorise the release process. Two possibilities. If the LL/Agents knew or authorised this arrangement between incoming and outgoing tenants, then arguably the payment from new to ex tenant constituted the LL receiving the deposit already held afresh for the new tenancy. (Complicated by the ‘protected in previous tenants name issue). If the LL proposes to potentially make deductions from the held deposit in respect of the new tenant’s period of occupation, this is definitely so. Quite how this would practically work without some participation from ex-tenant to release or transfer a protected deposit is hard to imagine.
However, if the LL/Agent had no hand in these arrangements, even to approve them, and the LL says that there is no deposit for the current tenancy, then the current tenant has little option but to seek the money back from previous tenant, who would in turn have to seek its release from the deposit scheme.
Of course, if the deposit isn’t protected and the agents are blowing smoke, the whole thing is much easier – the deposit was arguably transferred to the new tenancy, isn’t protected and the usual HA 2004 points apply.
If Stephen is right – and sub tenancy may be what has happened – then the only recourse is against the ‘previous’ tenant(s) for the money back, as they are your correspondent’s landlords. But given the LL/Agents apparent acquiescence, I think I’d prefer the surrender and fresh tenancy view.
In short, its a complete mess and I wish people wouldn’t do this kind of thing.
The “obvious” interpretation of a transaction where money changes hands in relation to a right against a third party is that it is a sale of the chose in action. If that is correct, once the new tenants have appropriately notified the deposit protection scheme and the landlord, they are entitled to take the deposit in place of the old tenants. Of course, if the scheme is adamant that the Law of Property Act 1925 doesn’t apply to them, a trip to court might be necessary.
Yes, its a nightmare. I can understand in a way why people (or at least the tenants) fall into this situation, but it is really bad news all round.
Here are some comments I got from my contact at the DPS
“This is a really bad practice and can have serious implications for both parties. The DPS will only pay the deposit back to the registered tenants at the end of the tenancy – this could result in the new tenants completely losing out. It’s even worse if there is a dispute because we insist on seeing the tenancy agreement, and if it doesn’t contain the correct tenant’s details the landlord will also lose any claim he might have had on the deposit.
My advice to letting agents and landlords would be have a new agreement signed for every new tenancy and ensure the tenancy details on the DPS system accurately reflect the contents of the agreement. Also, there should not be any cash transferring between tenants – the DPS will pay back the deposit to the outgoing tenant and the landlord should submit the new deposit to us when registering the new tenancy”