Here is a question to the Blog Clinic Fast Track from Rachel (not her real name) who is a tenant.
The concise question is:
At the end of an AST contract, can the landlord simultaneously undertake (a) a tenant swap and (b) a contract extension against the written wishes of majority of the outgoing tenants, and retain the deposit?
The context:
We are four tenants sharing a four bedroom flat. All four names are on the contract. We had a one year AST contract, under English & Welsh law. Towards the end of the contract, three of the flatmates decided that they would move out at the end of the contract and therefore not renew the contract. One flatmate decided she wanted to stay and find replacements for three outgoing tenants.
The three tenants wrote to the landlord stating that they would not renew, that the contract would terminate at the end of its term, and that the tenants would be released from any obligations after the end of the contract term, and that they expected the deposit to be released.
Separately, the one flatmate who wanted to stay found three replacements. The landlord then signed a contract with that tenant, plus the three new tenants.
Now the landlord is refusing to release the deposit to the outgoing flatmates, and telling the outgoing flatmates that it is their responsibility to organise a deposit transfer from the new tenants to the outgoing ones. There is a clause in the new contract saying that costs for any damages must be agreed with the outgoing flatmates.
Whilst we understand that this might be the case for a tenant swap during the term of the contract, we do not believe that this should be the case at the end of a contract term.
The tenant who is staying has a history of not paying bills, and when a tenant swap was performed during the last contract, this tenant asked the incoming tenant to transfer the deposit to her, but never transferred it back to the outgoing tenant. She has done the same thing with the incoming tenants. We (the outgoing tenants) are therefore worried that we will not get our deposits back.
Answer
I can see several issues here. First of all – there is no such thing legally as a ‘tenant swap’.
In law, the only way an individual tenant in a joint tenancy can be changed is by creating a new tenancy with the remaining and incoming tenants.
This is the case whether the change takes place mid-term (in which case the original tenancy will need to end early) or when a new tenancy is given at the end of the fixed term. The reason for this is down to the legal rules that apply when people own a tenancy jointly.
To avoid confusion, in this answer I will call the original tenancy, ‘Tenancy 1’ and the replacement tenancy ‘Tenancy 2’.
Let’s take a look first at the law and
How a deposit should be dealt with
All deposits need to be protected in a government authorised tenancy deposit scheme within 30 days of the deposit money being paid to the landlord or his agent. In addition, prescribed information must served on the tenants, also within the 30 days.
When a tenancy comes to an end, if one or more of the tenants are leaving, the deposit will need to be dealt with.
The proper procedure is for a new inventory to be prepared, any deductions made for damage done during Tenancy 1 (as it would be unfair for incoming tenants to be held responsible for this), and the balance of the deposit returned to the tenants of the Tenancy 1 – maybe retaining the remaining tenants portion The incoming tenants for Tenancy 2 will then need to pay the rest of the deposit amount to the landlord.
The deposit for Tenancy 2 will then need to be protected in a tenancy deposit scheme – within 30 days of receipt of the money – and the prescribed information served on the tenants.
Problems in your case
I think the first thing you need to do is check whether your deposit for Tenancy 1 has been properly protected in a scheme. Click here for a page (on the Shelter website) with links to all three schemes where you can do this.
If the deposit for Tenancy 1 was protected then you need to contact the scheme and ask their advice. It should be possible to get the money released to you.
If your deposit hasn’t been protected – then, strictly speaking, you will be entitled to bring a claim against the landlord at court for
- the return of your full deposit and
- a penalty of up to 3x the deposit sum
However, from your question, it looks as if one or more of you may not have paid the deposit money to the landlord but to the remaining tenant. In that case – will the landlord be responsible for dealing with it?
It’s a moot point and I am not sure I know the answer.
It is arguable that if a landlord tells incoming tenants to pay the deposit money to one of the other tenants, that tenant could be deemed to be the landlord’s agent for that purpose.
In which case the landlord would be deemed to be responsible for the deposit money (in the same way they are if the money is paid to a letting agent), and a claim could be brought against him under the deposit legislation.
If not, then as the landlord never had the money, he cannot be held responsible for it. Any claim will have to be made against the tenant it was paid to.
It is clear however that your landlord is not complying properly with the deposit legislation. I suspect that if a Court claim were brought against the landlord under the deposit regulations, the Judge would be on your side.
If the landlord continues to refuse to refund the deposit money, then I suggest you speak to a company which specialises in acting for tenants on deposit claims. Some of them, for example, this company, will act on a no win no fee basis.
Bringing a claim – the claimants
Note that there will be a problem in bringing court proceedings in your case, as there is a rule that all the joint tenants of a tenancy need to bring the claim together. Which would mean all the tenants in Tenancy 1.
As one of the tenants in Tenancy 1 is remaining at the property she will probably be unwilling to do this – particularly if she was the person you paid your share of the deposit to.
The problem could, I understand, be resolved by applying to the court for an order under the Civil Procedure Rule 19.3, and it may be necessary to make the dissenting tenant a defendant to the claim. You would have to see whether the no win no fee company were willing to act in these circumstances.
Your concise question
This is not actually the issue in your case. If a new tenancy agreement has already been signed then this will have the effect of cancelling the original tenancy – so the landlord is not extending the original contract.
The question is really, who was the deposit paid to and was it properly protected? Then, if it was not protected, will you will be able to bring a claim against your landlord for the penalty?
Conclusion
This is a very unfair situation. You have paid a deposit in good faith but it is possible you may not be able to recover it, or the penalty which Parliament provided to tenants for this situation.
If your landlord had used a letting agent, you would have been able to bring a claim against their Property Redress Scheme. However, as you dealt directly with the landlord this is not available to you.
Which is one reason why some kind of redress scheme covering landlords (as proposed by the Government) would be a good idea.
In order to protect their position, I would recommend that tenants NEVER pay their deposit money to another tenant. It should always be paid either to the landlord or to a letting agent.
You should also check, at least two months before you are due to move out, to see if your deposit has been protected (which you can do via this page).
If the deposit has not been protected, and particularly if one of your co-tenants is remaining in the property – you may want to consider deducting your share of the deposit from your final month’s rent.
As it is likely that otherwise, you may never get it back. Or not without a great deal of trouble.
If three of the tenants served notice during the fixed term of the contract, that notice isn’t valid.
Firstly because it isn’t possible for a tenant to serve notice to quit during the fixed term and secondly because during a fixed term any notice of any kind would have to come from all of the joint tenants.
The clause in the new contract about agreeing damage claims with the outgoing tenants doesn’t bind the outgoing tenants who haven’t signed it.
I think the situation is actually pretty clear. By signing a new tenancy agreement for the property with a new set of tenants (legally, one tenant) the landlord has clearly confirmed that the previious tenancy has ended. The landlord can’t let the same property twice to different tenants at the same time on an AST (because possession has to be exclusive).
The landlord must have control over the deposit (otherwise they aren’t in a position to decline to return it) and the deposit relates to a tenancy that’s ended. So it has to be returned. If the landlord doesn’t have control of the deposit, there isn’t actually a tenancy deposit at all.
If there is a deposit, as it belongs to the original tenants “jointly”, I don’t see how three quarters of them can sue the landlord for its return, as they have to do that jointly – and one of them isn’t going to play ball.
“If three of the tenants served notice during the fixed term of the contract, that notice isn’t valid.
Firstly because it isn’t possible for a tenant to serve notice to quit during the fixed term and secondly because during a fixed term any notice of any kind would have to come from all of the joint tenants.”
But they can serve notice that they do not agree to continue with the agreement beyond the end of the fixed term. If they then vacate on or before the last day of the term, then a statutory periodic tenancy will not (imo) arise.
This is because S5(2) Housing Act 1988 says “the tenant shall be entitled to remain in possession”, not is obliged to remain in possession, and S45(3) says “tenant means all the individuals”.
By at lest one person in a joint tenancyvacating before a SPT arises, no SPT can arise because the tenant (all the individuals) has not exercised their entitlement..
That’s an interesting point and I think I stand corrected.
It does make it interesting for any of the individuals who don’t leave, who will (I guess) have to create a new tenancy by paying rent.
The argument is moot in this case since for different reasons, all of the parties is acting as if tenancy 1 has been surrendered, and tenancy 2 has started from when tenancy 1 ended.
A statutory periodic tenancy would arise if only 3 of the 4 moved out and no new agreement existed. The test is how the fixed term tenancy ended, and if it wasn’t ended by surrender or other action of the tenant (or court order or Immigration Act notice), then a SPT will arise. If 1 of them are still living there, then there clearly has not been a surrender by all the joint tenant, and neither has the tenancy been determined by other action such as a notice from all of the joint tenants.
The entitlement exist by virtue of the existence of a periodic tenancy that has been deemed granted, coming into existence immediately on the coming to an end of the previous tenancy. The tenant of the periodic tenancy is by section 5(3) the same as who was then tenant immediately before the old tenancy came to an end.
You seem to be saying that a SPT arises because a SPT arises.
The Acts explicitly states “entitled”, which suggests that the tenant has to take action for it to arise.
Alternatively, they have to not do something that would prevent it from arising.
The Act requires that to “do” something requires that all the individuals agree to do that something, whereas to “not do” something requires that at least one person does not do that thing.
Thus it appears to me that for “the tenant” of the original tenancy to remain in occupation (to “do” something) requires that all the individuals remain in occupation.
Interesting argument. Do you think in order to ensure that an SPT does not arise, then notice must be served by those joint tenants not wishing for a continuation under SPT?
In the above case of course it is a moot punt as mentioned by others commenting and Tessa, because LL issued a new contract, (so it’s implied surrender even if you argue that if just one tenant remains, the tenancy continues)
But I’m just wondering how this situation would actually operate in light of joint and several liability. It seems to me by your argument there could be the following situations if the landlord does not issue a new contract. (but also, as an aside, imagine the mess if the landlord did issue a new contract and one of the outgoing tenants had a change of heart and contested it?!)
a) 3 of 4 joint tenants leave on the expiry of fixed term, no notice given to landlord
So in this scenario, to my mind the tenancy would continue as an SPT and the 3 would remain liable but could now give notice
b) 3 of 4 joint tenants leave on the expiry of fixed term, each gave notice to landlord.
This scenario is basically the one you depict, right? So if only one remains in occupation, the tenancy doesn’t continue? Implications of this are quite profound, what is the remaining occupiers status then?
Joint tenancies, eh?
The way I’ve always seen is that at the end of the day it will be my responsibility as landlord to repay the deposit so the obligation to secure the deposit and administer it must always lie with me. Therefore any new incoming tenant must pay the deposit to me, and I must refund the outgoing tenant. If an incoming tenant were to promise to refund an outgoing tenant and then didn’t, the ultimate person for them to claim from is me, the landlord.
Blimey, be careful how you go throwing such sensible opinions around.