Here is a question to the blog clinic (fast track) from Hazel (not her real name) who is a guarantor.
I am a guarantor of a 12 month AST joint tenancy for my 21-year-old granddaughter start date November 2017. The flat is in poor condition and of a ‘budget student’ standard
There is no gas certificate that we know of or inventory but the deposit is in DPS scheme.
The other tenant also has a parent guarantor and wishes to stay in the flat. There is no break clause and no right to assign.
(3.12) Not to assign, or sublet, part with possession of the Property, or let any other person live at the Property, without the written consent of the Landlord or his Agent.
Unfortunately, due to depression my granddaughter lost her job in January 2018, ( could get doctor note ) but found a new one abroad and is leaving the country.
She found a new tenant that fulfilled all the original vetting criteria and one that the joint tenant wanted to move in to replace her. This tenant provided a full guarantor and all the same criteria for the let in November 2017 was met and there would be no loss of rent.
However, the landlord refused. We had to let that potential tenant go to discuss options with him as he said he would be ‘trespassing’ if he moved in. I appreciate that this is an ‘unregulated market but can the landlord really do the following?
We have now entered a protracted correspondence with the landlord ( in fact a friend acting as agent to the landlord ) who has produced a set of fees and a surrender agreement for us all to sign so that the tenancy is terminated at a date undisclosed and at the discretion of the landlady on finding new tenants under extremely prohibitive income and guarantor rules, different and setting the bar higher and more onerous than before.
In addition we are signing and agreeing to costs yet to be revealed, admin costs all amounting to approx £1,725 letting agent fees including his own personal admin costs d rising as many are not fixed. Whilst we are willing to pay reasonable costs and penalties we have know way of knowing how they might get out of hand especially as one cost of failed referencing amounts to £50 a time and the landlord requires further compensation fees if tenants fall through. The costs seem unfixed.
The main worry is the new bar that has been set for new tenants for accommodation of this budget level seems so prohibitive to finding replacement tenants and guarantors that it is designed to punish us and we would have to pay to the end term of the tenancy plus all the feesto terminate when the termination will never actually take place as we have no reassurance or guarantee.
However my research led me to believe that we may have a case too in terms of assignment, in that he has been unreasonable in that we found another tenant under same criteria as before but he refused.
(Finding another tenant – If you are able to find a suitable tenant yourself, your landlord should agree to re-let to them and let you off the hook. If they refuse (and there is no provision on the tenancy agreement for ending early), then the Office of Fair Trading Guidance on unfair terms indicates that any contract clause forbidding assignment of the lease after 3 months will be invalid.)
Can you help with this? Either we insist he must let us assign ( we have now lost that previous tenant and had to compensate the joint tenant in lost rent ) or should we do the termination under risky fees and he may not find tenants?
I have documents and evidence of all the above.
Answer
This is a very difficult situation and guarantors have few rights.
Unless there is a break clause in the tenancy then a tenant does not under the current law, have any rights to end a tenancy early.
There is also a case (Reichman & Dunn v Beveridge & Gauntlett from 2006), admittedly involving a commercial tenancy but at the moment it applies to residential tenancies, which says that if a tenant wants to leave early, a landlord has no duty to ‘mitigate’ his losses and will be entitled to continue to demand the rent from the tenant – even if they are no longer living there – on a month by month basis.
The prohibition against assignment
There is an argument that a tenant should be able to assign a tenancy if the landlord unreasonably refuses to grant a new tenancy to a replacement tenant.
This is the argument that you mention and it is based on the old Office of Fair Trading guidance on unfair terms from 2005. This stated that the OFT would consider an absolute prohibition on assignment to be unfair if there was no break clause or other way to end the tenancy early after 3 months.
However, so far as I am aware, this has never been tested in the courts and I am not aware of any actual case which supports this view. The Guidance is no longer supported by the Competitions and Markets Authority which took over this part of the Office of Fair Tradings remit when they closed down in 2014.
Rights of one joint tenant wanting to leave
The situation here though is that only one of joint tenants (your granddaughter) wants to leave. The other tenant wants to stay.
Even if assignment were allowed, one of joint tenants cannot assign her share to another new joint tenant – I dealt with this here. Although I suppose a deed of assignment could assign the tenancy from A and B to A and C.
The lawyer’s answer
If you are looking at strict legal rights, the landlord is, I am afraid in the right.
He can just dig his heels in, refuse to allow any changes and just demand his rent on a month by month basis. Or, as he has done, make expensive demands as a condition of granting a new tenancy to new tenants.
After all, a tenancy is a legally binding agreement. It is a serious commitment and people should take care before they sign it. The landlord has complied with his part by providing the accommodation. Tenants are expected to comply with their part of the bargain by paying the rent. It is unfortunate that no break clause was added to the tenancy agreement.
An assignment is a possible answer – so long as the assignment is of the A and B to A and C variety and not an assignment just of your grandaughters beneficial interest. However, I am always unhappy with assignment in short let situations and there is always a danger that it could be found invalid. I am also not sure how it would affect your position as guarantor.
Leaving aside any question of assignment, you as guarantor will only be actually liable if the guarantor makes formal demand on you.
If that happens you have the right to claim back any money you pay over to the landlord from your granddaughter as she is the real cause of this problem. If she were still living in the property all would be well. Is it right that she should just go swanning off to a new life abroad leaving you and the other tenant to sort out the mess?
That is the strict legal answer. I realise it will not make you happy! However, it’s not the only answer.
Other answers
There is no doubt that this landlord’s attitude is thoroughly unhelpful and clearly he is looking to gain financially from the situation. Any reasonable landlord (and there are many) would have agreed to the change of tenant suggested originally.
If the landlord has not played fair with you there is no moral obligation on you to play fair with him. So below are a few suggestions. But first, lets consider
The landlord’s rights
Landlords often have an exaggerated view of their power over a property once it has been let. In fact, although they may technically have rights under the tenancy agreement they have very few legal ways to enforce them – they have lost physical control of the property by renting it out. Indeed it is arguable that in a sense it is now ‘owned’ by the tenants. A tenancy is after all a legal interest in land.
In reality, the rights of a landlord are to receive the rent as per the tenancy agreement and to receive the property back in the same condition it was let it (save for fair wear and tear) at the end of the tenancy.
Discover and keep a record of any landlord breaches
I would be surprised if a landlord like this is complying with all his legal obligations. You have already mentioned one serious breach – failure to provide a gas safety certificate. Unfortunately, this does not help particularly in this situation, but I suspect there may be other breaches on his part.
I suggest that you and the tenant start keeping a record or diary of any problems that occur with the property. For example, there may be things in disrepair. And although the deposit was properly protected, did the landlord serve the correct form of prescribed information? If he didn’t then there is a potential claim against him for the penalty.
When you look, you may find quite a few beaches. In fact, they may be sufficient to give you more leverage in your negotiations regarding changing the tenant. Otherwise, proceed as follows.
Stop negotiating with him
Just say that you are not willing to pay these extra charges and that you will ensure that his rent is paid. You could perhaps imply that your granddaughter is thinking of coming back.
Recoup losses by short-term subletting
The obvious answer to this situation is for the remaining tenant to just pay him his rent and then seek to recoup it by either renting out your granddaughters’ room to a long-term lodger or on short lets using a service such as Airbnb (she could even make a profit).
This solution though is dependant upon the co-operation of the remaining tenant. As a guarantor, you have no right to insist on this. It is also strictly speaking a breach of the terms of the tenancy.
If you go down this route, there is no need to tell the landlord about it or indeed to tell him anything at all. In fact, it is probably best to contact him as little as possible. Just pay him his rent and keep quiet.
If he does ever find someone else staying in the spare room then it is just a friend. He has no right to prevent tenants from having guests.
I would not suggest this normally, but this landlord has not behaved fairly towards you. If the landlord were to bring any claim against you relating to this (if he ever finds out), you will have your list of landlord breaches which can be used in negotiations (or in the unlikely case that he goes to court – as a counterclaim).
I suspect also that any Judge will be seriously unimpressed with his failure to allow the property to be re-let to the original replacement tenant found by your granddaughter. He (or she) may even consider that the landlord has lost any right to object to subletting by his actions – although don’t count on it!
A Notice to Quit to in November
After the tenancy ends in November 2018 your granddaughter should serve a tenants Notice To Quit on the landlord – as this will end the tenancy at that time and get her (and you) off the hook for future rent.
I’ve just had over 40 applicants to rent one of my properties. Carefully checking and double checking, balancing their tenant risk profile with my other tenants, fitting them in with my medium to long term business plans, finally selecting the right tenant for me over a costly void period of 2 months.
-Someone I trust enough not to welsh on our agreement incidentally.
There is far more to finding the right tenant than just grabbing anyone who can come up with the ackers.
As for your advice about putting it on Airbnb……pfft!
Yes, I know the Airbnb option will go down like a lead balloon among landlords. But it is only in the context of a landlord who is being totally unreasonable about allowing a change of tenant.
In fact, one reason for landlords to be more accommodating about this sort of thing is to prevent tenants doing this!
This is very good feedback. I suppose the main fear is the possible outcome of the scenario of signing the termination agreement, to be taken on a long ride obtaining new tenants because the landlord has set at a bar too high for a flat of this kind ( 30 k income plus guarantor/s ). Indeed new tenants may never be found, resulting in £2,000 of costs and the cost of rent till end of term. In the scenario of signing the termination and agreeing to unseen charges and no tenants being found or moving in what would be the legal position? Money will have already been paid over. Would there be a case to argue in court that the landlord had been unreasonable in his requirements for new tenants and misleading about the termination so just to make extra money or would there still be no leg to stand on.
I have known of cases where landlords have taken the payment and then done very little about finding a replacement. It is difficult to monitor this sort of thing with a landlord who is untrustworthy.
The landlord does rather have the tenant over a barrel as the tenant has no rights to end the tenancy early (in the absence of any break clause) and so is dependent on the landlord’s goodwill.
You wrote “After the tenancy ends in November 2018 your granddaughter should serve a tenants Notice To Quit on the landlord”.
That seems to suggest that the granddaughter can do nothing to prevent a statutory periodic tenancy from arising.
This is a balanced view, and totally the kind of feedback we needed. I would argue that Tessa’s viewpoint is balanced and fair as taken on a case basis this is a good example of a landlord playing martyr and profiting financially when there was absolutely no call for it. Rightly pointed out it also potentially digs him a bigger hole. ( Treat people how you would like to be treated ). I wouldn’t be here if the new tenant assignment had been agreed or the termination was reasonable. Now I have to consider action really not in the landlord’s interest. Ultimately he gains nothing from his approach. He might actually find it is exasperated.
The irony of this of course is that I am not only guarantor to my grand daughter’s flat but I am private landlord myself to one small flat that gives me a cushion. Last year my tenants wanted to move out weeks after they moved in on the AST for no reason except change of mind and move to a different area. I had the great inconvenience of advertising and re-letting, and charged an admin fee of £175. I was reasonable, but at the same time the tenants accused me of being unreasonable and being a ‘property shark’ for charging them.
It really seems there is an unregulated and distorted market out there. You get bad tenants and bad landlords. Good tenants and good landlords. The unfairness of people ‘renting homes’ as a business in order to profit seems out of tune even more so now than a decade ago as young people’s genuine and moral right to have a home that does not cost them nearly all of their hard earned income seems more and more a distant dream. They never own their own home and rents are rising in relation to incomes, whilst landlords with property portfolios built at a time when property was cheap only benefit. There is something morally wrong about this. I am glad the government has raised stamp duty and changed allowable expenses but sadly it is too late.
Especially since there is little regulation, and this thread is a prime example. Whilst sympathy can be had for the landlord and my grand daughter cannot be excused for irresponsible signing of the contract and losing her job, it would concur that the landlord is a distinctly more powerful and affluent position. From my point of view when I was reasonable with my own tenants in the case of them moving I reflected this in my charge. These days it is easy to vet and reference new tenants and check in without much expense as so many agencies offer it. I would not hesitate to say the tenants are in a position where the power is wrongly tilted in favour of the landlord, and this is where things can go badly wrong when the landlord abuses his position. In any life situation when people abuse and use their status or power it can be morally questionable – but ultimately BACKFIRE.
According to National Audit Office figures since 2005 rents have been rising in line with wages except in London.
The relevant clause reads:
“Not to assign, or sublet, part with possession of the Property, or let any other person live at the Property, without the written consent of the Landlord or his Agent.”
That is not an absolute prohibition and accordingly section 19(1) of the Landlord and Tenant Act 1927 applies. It implies a proviso that such consent is not to be unreasonably withheld.
There are cases on when it reasonable to withhold consent, but in relation to a short term residential tenancy if the prospective new tenant produces adequate personal and financial references there has to be some very good reason for the landlord to withhold consent. It is established law that a landlord cannot insist on a new tenant who is as good as the exisiting tenant. It is sufficient that the proposed tenant’s covenant is adequate.
Further, the Landlord and Tenant Act 1988 imposes on a landlord the obligation to give consent unless it is reasonable to refuse it. It also gives a tenant the right to damages if any refusal is unreasonable.
Dear Lawcruncher, is this really the case? How do we go about representing ourselves and addressing the landlord in regards this that you raise – get a solicitor to write a letter? It is new information to me, so far all legal advice I have is firmly with the landlord doing exactly as he pleases. One thing is certain we are not signing an onerous termination with no fixed costs. Do I go to a solicitor with the response you have provided so they can help us?
“accordingly section 19(1) of the Landlord and Tenant Act 1927 applies.”
Not according to this;
https://www.traverssmith.com/assets/pdf/Articles/When_its_reasonable_to_say_no.pdf
Section 19(1) does not apply to:
● residential leases, mining leases and agricultural and farm business tenancies
Or this;
http://www.legislation.gov.uk/ukpga/1988/50/part/I/chapter/I
Section 19 of the Landlord and Tenant Act 1927 (consents to assign not to be unreasonably withheld etc.) shall not apply to a term which is implied into an assured tenancy
Hello, hbWelcome, so this is bad news for us the tenants and guarantors then?
Well, there are some smart minded and fair people out there who have very good excavation skills, thank you! It sounds as though the law may need to change or tenants educate themselves more to what happens when landlords play unreasonably, ( I wish we had the break clause ) but it doesn’t help us.
I was rather hoping that there may be a regulation in place prohibiting a landlord to take large sums of money from tenants for charges to do with a termination agreement to find new tenants once signed. We cannot sign something that basically says we will be charged for ‘any’ costs arising, including £50 per each tenant who fails credit and reference checks when the new bar is set at 30k per annum, plus two guarantors with prescribed incomes too. It is designed to only punish us and I don’t think we will be signing it.
What we will be doing however is investigating all counts of breaches on the landlord’s part of this poorly presented flat, with mould, no gas safety certificate and more that people who advocate rights for all can advise us so that we can protect ourselves if he seeks to further claim money unfairly down the line ( which he is within his rights to do by law ), but we also have rights, not many but enough to show the landlord we will not be walked all over and punished when the flat is really a poor excuse for a home designed to make him money.
The position is not as represented above as section 19 LTA 1927 is not disapplied in respect of fixed term assured tenancies.
Section 15 of the Housing act 1988 says:
“(1) Subject to subsection (3) below, it shall be an implied term of every assured tenancy which is a periodic tenancy that, except with the consent of the landlord, the tenant shall not—
(a) assign the tenancy (in whole or in part); or
(b) sub-let or part with possession of the whole or any part of the dwelling-house let on the tenancy.
(2) Section 19 of the Landlord and Tenant Act 1927 (consents to assign not to be unreasonably withheld etc.) shall not apply to a term which is implied into an assured tenancy by subsection (1) above.
(3) N/A
(4) N/A”
The purpose of subsections (1) and (2) is to prevent assigning and subletting periodic assured tenancies unless the landlord agrees. The default is that both are allowed in the absence of any restriction.
Lawcruncher – you are most astute – can you tell me what this means in layman’s terms please? Thanks in advance
If the proposed new tenant’s references were adequate the landlord has unreasonably withheld consent which entitles the tenant to damages. That is not a lot of help to you as you are not the tenant. However, the law leans in favour of guarantors and they can be released by some action of the landlord. In this case you can argue that you are released because you were prejudiced by the refusal of consent. Write to the landlord and say you are discharged from you obligations on that account.
Hmm. Sounds good but I am not sure it will work as under the case of Reichman & Dunn v Beveridge & Gauntlett from 2006, the landlord does not have any duty to mitigate his losses and find a new tenant.
Or are you aware of any case law which supports your argument?
Otherwise Hazel may be taking a bit of a risk if the landlord decides to sue her for the money.
I do not think it is a case of the landlord not having to mitigate his loss, but of the landlord doing something which releases the guarantor. It is certainly the case that it is possible for a landlord unwittingly to release a guarantor. Googling has failed to help and where I live copies of Woodfall are a bit thin on the ground. I cannot recall a case where the guarantor was released where the landlord unreasonably refused consent to assign. One case I do recall, which indicates the way the law regards guarntees, is where the lease provided for the third party determination of rent to be made by arbitration, but the parties went for an expert. That was held to prejudice the guarantor and explains why a well-drafted rent review clause which provides for arbitration allows for expert determination if the parties agree. You will be aware that some guarantees (especially of commercial leases) are hedged round with terms the intention of which is to allow the landlord freedom of action. Even so, a wise landlord always joins a guarantor in any deed varying a lease.
My overall impression was always that it does not take much to let a guarantor off the hook. It is certainly worth Hazel arguing that the the refusal of consent releases her. If it gets to court it gets a bit tricky as she will need to persuade the judge if he is not fully versed in the law of guarantees. Accordingly, if not employing a solicitor, she will need to do some research and, hoping she has a good reference library in her area, consult a book on the law of guarantees.
Any lawyer advising Hazel would of course want to see the form of guarantee she signed. Some are so badly drafted as to be virtually unenforceable. He would also enquire into the circumstances surrounding the execution of the guarantee because in consumer and related matters the law allows a person to make an unwise choice but not an uninformed one, as Lady Hale said in the bank charges case.
Maybe, but I think it is always best to avoid litigation if you can. Its nice for us lawyers but it is very stressful for the parties and can end up being extremely expensive.
Although if you are able to show that this landlord is in breach of his obligations and that the tenants have a substantial counterclaim for any claim he may make for rent, you may be able to persuade him to be reasonable.
‘Rogue landlords’ don’t normally want to put things to the test in court proceedings.
My advice would be to approach it from that direction.
Thanks very much. Yes it is very stressful and ideally litigation best avoided as incredibly stressful for all. Unless a clear cut case. We looked at the ‘prescribed information’ he is very experienced, he provided it all at start of tenancy. Of course as he is experienced too, and has student let companies, we understand now why he put no break clause etc. Is there anything further we can do about him failing his obligations? He is also saying no frequent guests not allowed ( what if a tenant has a girlfriend ?). He really seems to feel he is a king in power. We are on the verge of signing this termination as it feels we have no choice. If we sublet he would find out, some way and then imagine what could happen. War.
Even in the unlikely event of Hazel being able to wriggle out of her guarantor obligations, her granddaughter would still be on the hook.
Yes we are trying to act in her best interest of course. This will be a loan from us to her, ultimately she has to pay losses.
Lawcruncher, I do wish all this were possible without any doubt. I so appreciate your attention to detail.
Agree best to avoid litigation (and lawyers!) if you can. However, it is good for sites like this to let people know where they stand legally as it helps them to argue their case.
Ye this question and feedback has been most useful. It is not so that anyone can gain and have an agenda ( eg sell me their services ) It has been just great and made us all feel less like we were going round the bend not having a voice or rights! Thanks