Here is a question to the blog clinic from Ann who is a landlord
We have recently bought a house with a tenant in situ, he has lived there without any problems for four years. The house is in good order.
The previous landlord had several properties and has let his tenants down by not undertaking repairs and not paying the mortgages on his properties. He is now facing bankruptcy.
The landlord did not secure the bond of the tenant, so in effect the tenant is now one of his creditors.
As new landlords, we have given our tenant a new tenancy agreement, given him information about the bond and where it will be placed and informed him that when he pays his bond to us, he will be contacted by the DPS and be able to view the details of his bond.
He is a low wage earner and to date has not come forward with his bond, we realise that he has rights as a tenant, he has lived there for several years. It is not his fault that the previous landlord made off with his bond. However we need to secure the agreement.
Have you any advice you could give, or is it a case of paying the bond ourselves in full and claiming back from the tenant in due course?
You may be in difficulties here.
Tenancy deposits on change of landlord
When you buy a property with a tenant in situ, you take over from the original landlord, the rights and obligations that he had. We often say that you ‘stand in the shoes’ of the previous landlord.
So if the tenant paid a deposit to the previous landlord, YOU are now responsible for it. You cannot re-claim it from the tenant.
Strictly speaking the former landlord should have passed the money over to you at the time of purchase, but whether he did this or not is no concern of the tenant. He paid his deposit to the landlord. You are the landlord. So you are responsible for returning it to him.
Since April 2007 landlords have been responsible for protecting deposits in a tenancy deposit scheme and there are penalties for failing to do this (and serve the prescribed information) within the 30 day time limit.
As the previous landlord failed to do this, my view is that you are now liable, in his place as landlord, for the penalty, should the tenant go to court to claim this.
So my advice is to keep quiet about the deposit. Arrange to protect it (putting up the money yourself), and serve the prescribed information.
I would also suggest you don’t make any controversial deductions at the end of the tenancy which might prompt the tenant to seek advice and make a claim for the penalty award for failure to protect within the 30 days.
Note also by the way that should you wish to evict the tenant using the section 21 procedure – as the deposit was not protected within the time limit – you will need to refund the deposit money to the tenant before a valid section 21 notice can be served.
I agree with Tessa. You are now liable for the deposit. However, I would probably not protect it and would simply give it to the tenant now as you will not be able to evict him easily if you have not done so. This is a perennial problem in property purchases and should really be sorted out within the conveyance. Clearly, that was not an option here so it is just a hazard of buying this sort of property.
A discussion on this very point started on LandlordZone only yesterday: http://www.landlordzone.co.uk/forums/showthread.php?61483-Buying-a-property-with-a-sitting-tenant-deposit-protection The wording of section 214 HA 2004 would seem to put the matter beyond doubt (decisions of the Court of Appeal excepted).
First thought is don’t press the tenant for a new deposit.
Part of s214 HA 2004 here – why can’t the person who “appears to the Court to be the person holding the deposit” be the original Landlord, who was paid it and still has it?
I see all the arguments being put forward but I don’t see anything that unequivocally says it has to be the current landlord
(3) The court must, as it thinks fit, either—
(a) order the person who appears to the court to be holding the deposit to repay
it to the applicant, or
(b) order that person to pay the deposit into the designated account held by the
scheme administrator under an authorised custodial scheme,
within the period of 14 days beginning with the date of the making of the order.
This new landlord has been badly advised by the solicitor he used when he bought the property. They should have sorted this out for him – got the seller to indemnify him, got the doposit transfered etc etc
He has a very good claim against the solicitor
“Part of s214 HA 2004 here – why can’t the person who “appears to the Court to be the person holding the deposit” be the original Landlord, who was paid it and still has it?”
It can. The problem is that the section distinguishes between what the court must order in respect of the deposit and what it must order in respect of the “compensation.” When it comes to the deposit the section sensibly provides that the order should be directed against the person holding the deposit, who may the the original landlord. However, when it comes to the “compensation”, the order must be made against the landlord. I put “compensation” in quotes because the payment the landlord has to make is, I think, intended to be a sanction to encourage compliance rather than to compensate the tenant for any loss. If that is the case, then the draftsman overlooked the possibility that a landlord may sell.
If a deposit has been placed in a scheme before 6th May 2012 if should be deemed as protected (housing localism act 2011) I believe this gave all landlords one last opportunity to protect the tenants deposit before the new act came into force in 2012.
MT
You miss the point.
It would be protection for that tenancy at that time, though s213 offence committed anyway and no way of avoiding that.
The point is the action that needs taking after that in terms of any change in tenancy (new or periodic etc) or change of who is holding the deposit etc