Here is a question to the blog clinic from Joy who is a guarantor
I am guarantor for my son’s tenancy. My son was told £475.00 pcm and £475.00 additional rent/holding fee. The Tenancy commenced on the 02/11/2012.This holding fee was to be paid in 6 instalments of £80. I was not informed of this and did not see the TA although I did request a copy. I was told it would cost me £15.00
I received a letter in March telling me my son was £475.00 in arrears. I contacted my son. He informed me he went in with his rent but the letting agents took £240.00 of this rent towards the holding fee/ additional rent payment. Therefore pushing his rent into arrears.
I would like to ask you if this is allowed. To me it is a deposit if they are holding additional funds. I say this as the letting agents have now informed me it is my son’s finals months rent.
I have now been told in writing it is a
- Holding Fee
- Additional Rent Payment
- Final months rent.
Could you give me some guidance as to how this additional money would be viewed in law?
If you were not given a copy of the tenancy agreement, I would actually question the validity and enforceability of your guarantee. Particularly if they are now seeking to claim money from you for items which were not disclosed to you at the time you signed.
So far as the three explanations for the additional funds are concerned:
- It cannot be a ‘holding fee’ as your son is living in the property, and has done since last November. Holding fees are paid before the tenancy is granted – to ‘hold’ the property for a time so it is not let to someone else, generally while referencing is being done
- It cannot be an additional rent payment unless this was authorised by the tenancy agreement. As you have not been given a copy of this you cannot be bound by this
- They cannot request the final months rent now unless this is authorised by the tenancy agreement. Again as you were not told this and were not given the tenancy agreement you cannot be bound by this.
It sounds to me like a deposit, in which case it should be properly protected with a scheme and your son should have been provided with the prescribed information. Otherwise the agents are in breach.
If the agents are in breach of the tenancy deposit regulations, then your son is entitled to claim the penalty and request that the money either be refunded to him or protected with the DPS. You will find more information >> here.
So far as their claim against you is concerned, I suggest you write to the agents saying that as you were not provided with a copy of the tenancy agreement at the time you signed, and as it now appears that this document contained obligations which you were not told about at the time of signing, you have been advised that your guarantee is now invalid and unenforceable.
It’s a deposit without doubt.
The agent is all over the place on this and guilty on a few counts. Just threaten to go legal with a dispute.
Did you provide the deposit or any part of it?
This raises a few questions and you really need to see a copy of the agreement and any other paperwork. Can you look at your son’s copies?
Contrary to previous comments it is by no means certain that a judge would interpret the additional rent payment as a deposit. Some landlords no longer want to hold a deposit for damages because of the additional cost & bureaucracy but they are still keen to ensure the last month’s rent is still paid. Provided the agent has said in writing that it will only be used as the last month’s rent payment and it will not be used in relation to any breach or tenant liability, then it could be considered as just an advance rent payment and not a deposit (see http://nearlylegal.co.uk/blog/2009/02/its-not-a-deposit-honest/). Of course, if they tried to hold any of this money at the end of the tenancy for damages etc. then they clearly are breaking the law, but you won’t know until the end of the tenancy.
Perhaps the first instalment of £80 was initially a ‘holding fee’ that was subsequently refunded and used as an advance rent payment along with the other instalments?
Reading between the lines, your son agreed to pay these 6 x £80 rent instalments but missed three payments, so the agent took the overdue amount of £240 from his next payment thereby taking him into arrears. This seems reasonable to me so far. I don’t understand why he is £475 in arrears though. He said he went in with the full rent for a month (£475) and they took £240 which means he should only be £235 in arrears. I think this part needs clarification.
The problem for the agent is that you cannot be bound by the terms of the agreement as a guarantor if you have never seen the terms of the agreement. This means they cannot chase you for the arrears, but they can still pursue your son or any other tenants who will almost certainly be joint and severally liable.
It’s certainly not standard practice and the agent should have given you a copy of the agreement, but the advance rent is not necessarily a deposit and your son is still in arrears.
@Jamie T
Of course it is by no means certain – but it is highly likely. Jamie it doesn’t matter what you or me, Tessa or the agent call the money. What matters is what the LAW calls it.
Look at clauses 34-38 in the Johnson decision – the gap is probably fatal, it’s a deposit.
A holding deposit is not in my experience £5 more than a months rent and therefore it seems an unreasonable amount.Also it is normally paid up front. Such a fee is normally to cover a few days whilst tenants decide if they will take a tenancy and means that the agent will not let it to anyone in the mean time. It does seem that when challenged the agent changes their argument.
As Tessa and Jamie have said the terms of the tenancy agreement and guarantor are particularly important and an adviser needs to see them before any definitive advice can be given. I have seen a lot of guarantee agreements that are unenforceable for various reasons.
If this is a student tenancy then the Student Union advice services may know this agent/landlord and should be in a position to represent the tenant and possibly co-tenants to them in writing. There may be further problems in the year and therefore it may also be useful to contact the landlord direct who may not know what the agent is doing and if you have not been given the landlord’s address the agent is required by the Landlord & Tenant Act to supply it within 21 days of a written request.
If the agent refuses which is not uncommon. then the local Council may intervene as they are the responsible body for enforcement of that part of the Act, although not all will do so.
Absolutely right Colin I think the amount held, and how long for, are critical factors in the decision on whether money is a deposit or not – no matter who calls it what.
In Johnson it was determined to be a 6 monthly tenancy and so the obligation had arisen and been discharged by the 6 monthly payments.
This situation is totally different and the money is quite clearly being held to ensure a later obligation – the final rent – is paid. That clearly makes it a deposit.
The advice on the agreement content is correct, the linkage between seeing the agreement before signing the Guarantee is common sense, but far as I am aware only an OFT preference and not actually Law – though it would carry weight in any legal action and arguments.
When you say Council enforcement under s1 of 1985 L&T Act I assume you mean Trading Standards?
@IO
It certainly is down to the law to decide and in Piggott v Slaven, advance rent was ruled specifically not to be a deposit. To say “it is a deposit without doubt” is a very risky stance and not necessarily correct. Much depends on details we don’t know about and at least one legal case has ruled against your assumption.
@Jamie T
Was Piggot v Slaven a CoA or Supreme Court decision? And did it pre-date the Localism Act I believe it did.
Please quote me the case at CoA or Supreme Court level you say rules against my position AND ON THE SAME BASIC FACTS
@ Jamie T
A bit of quick research confirmed what I thought Piggot was only a County Court case. Plus there is legal opinion that the decision could just as easily have gone the other way in another Court on another day.
Please quote me the case you referred to in your final comment
The enforcement body for LTA 1985 is the local council. The department depends on what particular arrangements are made within the authority. I think it unlikely to be Trading Standards but it may become so if Letting Agent licensing is brought into force. It is more likely to be Tenancy Relations if such a department exists or private sector housing.
http://www.legislation.gov.uk/ukpga/1985/70
This particular case will turn on its facts, which are not clear and if it should proceed to County Court-the DJ on the day.
What a mess! For there to be a ‘fee’ there must be a contract (written or verbal) that says who the parties are and what their obligations are. What was agreed that the ‘fee’ was consideration for? Cannot see how you someone can charge a ‘fee’ for holding, holding what exactly?
I wasn’t aware the Johnson case had made it through appeal yet; it must be a relatively recent decision. Prior to appeal the decision had gone both ways.