My Tenant Is Threatening Legal Action Because I Didn’t Secure The Deposit

I could throw a stone in the middle of a landlord conference (who actually goes to those things, seriously? Maybe a blog for another day) and probably hit a landlord on the head that’s either been through it, going through it, will eventually go through it, or at the very least, unknowingly harbouring a tenant that’s looked into it.

Rightly or wrongly so, we’re being hunted down like rabid dogs for failing to comply with the tenancy deposit legislation. We’ve become such easy and profitable targets that specialised ‘tenancy deposit claim management’ divisions are popping up all over the place, to assist in the management of dragging and encouraging dormant tenants to claim their unclaimed fortunes. How fucking generous of them.

Business is BOOOOOOOOOOOOOMING!

Every landlord should unequivocally comply with their legal obligations, even the policies that are more ghastly than the boils on your mum’s sloppy face. And while so many try to use ‘ignorance of the law’ as a defence (from my experience, that’s the most common excuse), legitimately or otherwise, it’s still (and always will be) pointless to even mutter the words. Save your warm, unsavoury and moisty breathe for your spouse.

But on the other hand, I’m finding it impossible to empathise with those dick-face tenants that are taking advantage of ignorance purely out of greed. Don’t get me wrong, unscrupulous landlords deserve for their profits to be drained like a large infected cyst, and compensation should be allocated fairly to those that suffered as a consequence. But sadly, there are too many cases surfacing whereby good landlords, but foremost genuine people that are only trying to do good, have been threatened and prosecuted by an academy of asshole tenants that are sniffing around a quick paycheck. Spineless leeches!

Our Landlord didn't secure deposit
Introducing the tenancy deposit legislation was a good move to protect both tenants and landlords, but as it currently stands, as with many legislations that are hashed together by servants whom are completely inexperienced and have no practical knowledge of how the relevant realm works, the finished product seems like it’s lined with clunky congealed skid-marks. Who approved this shit?

It’s clearly ridiculously too damn easy for undeserving prosecution, which has resulted in a long queue of tenants rubbing their grubby little mitts together and practically begging for landlords to fall-short of their deposit obligations, because it’s like a winning scratch card. That can’t be right, not on any level.

So this blog post is aimed at helping those “good” landlords caught up in the struggle. Stay strong, my brothers! Stay strong!

The Tenancy Deposit Legislation

Ok, so let’s go over this really, really, really, really, really, really quickly, because I’ve already covered the what, where and how’s in-depth, over at the Landlord Tenancy Deposit Guide blog post.

Obviously, complying with the tenancy deposit legislation from the offset, which is covered in Section 213 of the Housing Act 2004, should be Plan A:

  • This legislation applies to every landlord in England and Wales that has taken a deposit from a tenant under an Assured Shorthold Tenancy Agreement.
  • Securing the deposit: the deposit must be protected with in 30 days of receiving it.
  • Serving the Prescribed Information: after the deposit is secured, Prescribed Information must be served to the tenant, also within 30 days.
  • Late compliance: unfortunately, you’re still a target if you’ve secured the deposit and/or served the Prescribed Information after the 30 day window!
  • Landlord’s responsibility: it’s ALWAYS the landlord’s responsibility to ensure the deposit legislation has been complied with correctly. Don’t rely on your agent for anything, they won’t be held accountable.

The penalty for failing to complySection 214 of The Housing Act 2004 states that IF a Judge is satisfied there has been a breach they MUST sanction the landlord to cough up between 1 and 3x the deposit for each tenancy and also return the deposit itself. Ouchieeeee! Not to mention, you’ll also be unable to serve a valid Section 21 notice, which is arguably a shit-ton worse on every level!

If you’re sitting there hearing screeching noises as your stomach is avalanching out of your anal-cavity, and with your hands over your eyes and gob wide open, because YOU KNOW you’ve failed to comply, you may want to read the stone-cold reality of your situation over at the ‘I haven’t protected my tenant’s deposit‘ blog post to help plan your next move. I’m sorry to say, you’re in a pretty unforgiving situation, so the options ain’t pretty.

In short, if lady luck is on your side, your tenant’s kind nature or ignorance will allow you to tip-toe away unscathed. But ya’ know, if they eventually cotton on… don’t be surprised if your ‘perfectly reasonable tenants’ quickly turn against you and suck-the-living-shit out of you after uncovering the treasures that await them. There’s something very zombie’ish about tenants turning once they become enlightened.

My tenant is threatening to take legal action against me, what can I do?

Important disclaimer: before continuing, I must clarify, the following is NOT legal advice. Say it out loud, “NOT LEGAL ADVICE”… SAY IT!!! If you’re after professional legal advice, please speak to an extortionate Solicitor that specialises in landlord law. The following is purely based on personal experiences and hearsay…

If you’re currently caught in the cross-fire, the odds are it’s because your tenant(s) has discovered you’re ripe for prosecution due to your failure to comply with the tenancy deposit legislation. With their beady little eyes firmly on the prize, they’ve probably contacted you demanding compensation, typically somewhere between 1-3x the deposit value. Of course, it’s almost always x3 because they’re ambitious, they want the jackpot, and after a chat with their mate down the pub and/or doing their ‘online research’ they probably believe that’s what they deserve can get away with. And hell, why not reach for the stars? But what’s most worrying and disappointing is that many tenant’s chase after the easy money despite the fact they’ve benefited from a perfectly reasonable landlord throughout the tenancy, so that’s why many landlords are often caught blind-sided by what is quite frankly, daylight robbery. They may as well have posted this through your letter box:

give-me-money

I can only urge all tenant’s in that position to side-step and forgive by asking for the deposit back in full, and then by then making a strong vocal point. Hopefully lesson learned.

With that said, the following advice is suitable for those good landlords that are genuinely being taken advantage of by the money-grabbing parasites that don’t have the moral fibre to put their foot on the breaks…

Ultimately, your objective at this point should be to avoid Section 214 Housing Act Deposit Protection Penalty Sanctions.

Bu…bu… BUT my asshole tenant has also breached their tenancy obligations!

Ok, I hear this all the time! What a classic.

At this point, many landlords will frantically splash around, trying to kill the situation by pointing out their opponent’s shortcomings (i.e. “my tenant has fallen into rent arrears”, “my tenant shat on the carpet” etc), hoping for a ‘get out of jail card’. Unfortunately, focusing on someone else’s wrongs to mask your own is as embarrassing and futile as it sounds.

You need to understand that you’ve been a rat-weasel, you’ve done wrong. You are liable for prosecution, so right now it’s only a question of how little you pay.

Minimising costs & Settling

Ok, so… credit where credit due, the following is largely taken from Comment #226 over at the “I Haven’t Protected My Tenant’s Deposit, What Should I Do?” blog post, by an extremely generous, experienced and knowledgeable contributor, David. So a big thank you very much! The following will be a hybrid of David’s sound advice and my own toxic interference…

The reality is, the tenant just wants paying off; they usually have no intentions of escalating the situation to court (because that can be expensive, not to mention a whole heap of hassle). What they want is some free money, and the legal threat is an attempt to reduce you into a whimpering little girl and lure you into submission.

You have three options:

  • Pay what they demand
  • Fight in Court
  • Negotiate

If they’re asking for just 1x the deposit, it might be wise to begrudgingly pay up and move on with life, with the experience of knowing better for next time. No doubt, that might still hurt like a sledgehammer to the nuts, but it really is an easy escape from what can potentially be a very firm and prickly grip. However, if the amount they demand seems totally unreasonable (you may want to assess your performance as a landlord at this point, and be honest with yourself), negotiating is usually the way to go

After receiving the threat, you should respond swiftly. You should write your response knowing that a Judge or Mediator may look at it; that means you will want the Judge to see that you are the fair and reasonable person, while the tenant is nothing but a mumbling buffoon, using the Court to decapitate your wallet for some easy cash.

You should start with a letter expressing your complete astonishment and surprise. I would send something like this:

Negotiation Response 1

Dear [Tenant name(s)],

I was most perturbed to receive your letter before action considering I felt that we had a good Landlord and Tenant relationship, with no major problems on either side.

To be honest I was in complete astonishment and surprise because your letter before action was not preceded by any claim, nor a Part 36 offer of settlement, nor any suggestion of mediation.

I do regard this threat of legal action as vexatious and without merit, but I would like to keep things amicable and avoid wasting the Courts time. I am reliably informed that a Judge would view this for what it is; a frivolous attempt to extort money from me, using their Court in an inappropriate way.

At this stage I would like to ask you to reconsider your proposed Court action and agree a settlement with me; that being a positive letter of reference and the sum of £[insert low-ball offer, less than half of 1x deposit] as a gesture of good will with no liability accepted as full and final settlement of this matter.

I hope that you give this kind offer your serious consideration.

Yours sincerely,
[Landlord]

The low ball offer is to bring the leech tumbling back into reality (assuming their initial settlement fee was OTT). They will most likely reject your offer, which should definitely come as no surprise, because you’re dealing with a donkey that’s an utter chancer. In any case, now you’re dancing/negotiating. In response, they may ask for 1x the rent, which you may want to settle with, but they may play hard ball and ask for 2x the deposit. If they do the latter, I would reply with the following:

Negotiation Response 2

Dear [Tenant name(s)],

I am in receipt of your recent offer to settle this matter for 2x the deposit. I am sorry but I cannot accept this as the facts of this matter do not reflect the gravity of such a sanction.

There was no animosity between us, any repairs were carried out promptly and overall I was an excellent Landlord. I am reliably informed that a Judge will take into mitigation the fact that I am a novice Landlord, [and that I quickly protected the deposit in an approved scheme as soon as I became aware of my unattended oversight].

I have refunded the deposit to you in full despite the fact there were a number of issues with the way you left the property that were beyond wear and tear. I did this because I thought we had a good landlord/tenant relationship.

As I explained recently, I feel it is grossly unfair that you try to extort money from me, and whilst I am keen to keep things amicable, I will only agree to a settlement that is fair and reasonable. To this end I am prepared to provide the positive reference offered previously and increase my offer to £[no more than 1x deposit] as a gesture of goodwill in full and final settlement with no admission of liability.

I hope you will give this serious consideration so we can end this unnecessary hostility.

Yours sincerely,
[Landlord]

They may accept or they may try again. In any negotiation you have to give small amounts slowly and usually in response to something given by the other side. They will no doubt give reasons for why you should pay more, but if they don’t, then they are really showing they are weak. SO WEAK. WEAK LIKE… I don’t know… weak like your stomach after digesting an out of date pork-chop.

So be ready to offer incremental amounts, and then a final offer of no more than 1x – 1.5x deposit (or whatever you’re comfortable with), because at some point you have to draw a line in the sand and be prepared to call their bluff. It is your money and your risk appetite that matters here.

A Judge can decide anything they like within the legislation, but a lot of them get pissed off when it’s obviously just about the money (which is often the case). They have a huge case load; some may even kick the case out and force you to go to mediation. They may even say the tenants have to pay for that because you have tried 3-4 times to settle (that’s why it’s important to try and fairly negotiate).

This is ultimately a game of poker, your tenants know you have a potential liability, but you know you have mitigation; depending on their case, they may not get costs unless this goes to appeal, and that is going to be expensive for them upfront with no guarantee of success. That can be a powerful deterrent for the donkey to proceed.

If a settlement is agreed

Hopefully a fair settlement can be agreed. If that’s the case, it should be documented and laid out with a heading of “Settlement Agreement”, and it should clearly state that the settlement is the ‘full and final settlement’. The document should then be signed by all tenants. I’m currently working on getting an example Settlement Agreement as an early Christmas present from me to you, so sit tight for that! It’s all about love around here.

Correspondence

It’s important to send all correspondence through assured means. That could include all of the following…

  • Sending letters with recorded delivery
  • Delivering a copy by hand through the letterbox, while video yourself doing it
  • Sending it via email with a PDF version attached for good measure. The subject of the email should be “Formal Response to Letter before Action”

Every case is different

The problem with these cases is that they can come from 20 different angles; and the law has been amended so many times by statute and case law that it is a dog’s dinner. So while the advice above may not be entirely relevant or fitting to your particular case, I think the key takeaways are:

  • If you’ve been a good landlord, negotiate… do everything you can to settle!
  • If you feel your tenant wants a reasonable amount of compensation from the offset, you’re probably better off paying and considering yourself a little lucky sausage.
  • Ensure you are being fair and reasonable at all times; suppress your anger and frustration if you need to.
  • Always respond quickly, and send all correspondence through assured means.

Before deciding to take legal action!

A word of caution to any Landlord or Tenant thinking of taking legal action; it can cost you £8k to £10k if you get a belligerent opponent who takes this to appeal, employs a barrister and wins. So to emphasise…. the purpose of this blog post is to encourage all parties to settle, settle, settle!

So, anyone going through this dilemma, or been through it? What’s your story? Can you provide further advice? TELL MEEEEEEEE! TELL MEEEEEEE! xoxo

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80 Comments- Join The Conversation...

Showing 30 - 80 comments (out of 80)
The Landlord Avatar
The Landlord 25th November, 2016 @ 13:32

@David
The same as any other business - all running costs (letting fees, petrol, stationary etc)... all but the interest on mortgages from next year (which is still baffling)!

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Grumpy 25th November, 2016 @ 13:32

@David

yes, you are correct, its an option for some but not for most people.

A Ltd company, although possible, is probably a non starter for most.

Any sale will then trigger Capital Gains tax at 18% or 28%. Then stamp duty to repurchase in the Ltd Co.

After that, try getting a mortgage for Ltd Company and all the cheap rates vanish.

We already have our properties in an LLP, I was considering remortgaging for another project. I was only looking for about 250k (less than a 40% ratio) and the best rates were 3.65% for 2 years, then jumps to 6.5% SVR.

On top of that you have commercial valuation costs (700 to 900), broker fees (£1k), Lender Fees 1.5% (3750) + legal costs.

Then in 2 years, your on a 6.5% SVR, to "remortgage with the same lender", you are stuck with whatever they offer and also have to pay another property valuation fee or then find another lender and back to another stack of fees.

On top of annual accountant fees (1k - 2k) Ltd company route is basically not going to suit many people.....

In short the best APR you will find for LTD are on the 4 to 5% range. If interest rates went that high, a lot of people would lose their homes, some landlords included.

Another use for a Ltd company, is people are setting them up as their own "agents", charging themselves a management fee. This helps extract tax deductible income from the rental property, but this will only work with larger portfolios.

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The Landlord Avatar
The Landlord 25th November, 2016 @ 13:36

@Grumpy
Quick point... I'm assuming the accounting fees will only be that high if the LTD is VAT registered? Many landlords won't need to go VAT registered.

Either way, it's A LOT of hassle for landlords with small portfolios, innit?

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Simon Pambin 25th November, 2016 @ 14:00

@Landlord

It depends how much you want/feel competent to do yourself. You probably wouldn't want the hassle of filing statutory accounts and corporation tax returns but if you can present your accountants with a trial balance they can probably do the technical stuff for a few hundred.

I think the Government takes the view that small-scale residential property letting (buy-to-let) is more like an investment than a business, hence the disallowed relief on mortgage interest - in the same way that you could claim relief for the interest if you borrowed money to buy shares. In the circles that they move in it probably is just another investment vehicle but I don't think they appreciate just how much of a business it is for many smaller operators.

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David 25th November, 2016 @ 14:05

@Grumpy

As I said an agenda.

Interesting that you point this out:

"Another use for a Ltd company, is people are setting them up as their own "agents", charging themselves a management fee. This helps extract tax deductible income from the rental property, but this will only work with larger portfolios."

I have seen people do this with offshore companies a bit like the various sandwich avoidance techniques.

Also as you say a complete service charge from a 3rd party that is entirely deductible and at a rate that almost removes any tax liability.

When tax is not fair people move it out of jurisdiction and so tax is lost to the Exchequer

If they had some way to allow transfer to a Ltd Co and avoid CGT and Stamp Duty as long as the owners of the new company were identical it would probably open up loophole that needed to be closed by say a 7 year prevention of any change in shareholding or ownership.

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The Landlord Avatar
The Landlord 25th November, 2016 @ 14:14

@Simon,
Yeah, agreed.

I basically give my accountant a spreadsheet with all my incoming/outgoing expenses, all my receipts and bank statements for reference, and he does the magic. He doesn't charge me much because I essentially do the "book keeping" myself.

There are a lot of inexpensive BTL softwares available also, which make it relatively easy, and can keep accounting costs down over the longrun.

I think the Government has applied bits of red-tape which applies to "businesses", and bits of red-tape which applies to "investments", in order to create the most efficient way of charging more tax. But there are too many similarities in the way we're able to run a BTL with a business (if we're going to separate the two), so completely differentiating the two seems inaccurate.

But hey, we're just pawns.

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Grumpy 25th November, 2016 @ 14:32

@ Landlord

Yes I'm sure there are much cheaper options but I am a follower of the principal of "pay peanuts and get monkeys" :-)

Ive had a lot of Ltd companies over the years and the fees are never below £1k. Im not VAT registered and the 2 businesses I have are 750 & 1500 (+ VAT each).

....and these don't have huge day to day transactions. If you keep the Bookkeeping to yourself it does help.

Unfortunately the Tax law books have multiplied like a chopped off Hydras head, and over the years, it has essentially been impossible for most book keepers and small accountants to be a specialist it it.

Most accountants firms simply fill in the info you supply them and tick some boxes for filing. They are good at telling you the basics but proactive advice is sadly lacking...

Find a good tax accountant and their advice is well worth the money..... finding one is tough though.

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Grumpy 25th November, 2016 @ 14:41

Hi David,

I agree with you, for People with small portfolios, it is probably not worth setting up the Ltd to do that, and for one/two properties, it would be difficult to justify either economically or tax wise, however its not an "offshore" type scheme.

Many existing letting agents also have their own portfolios, thats probably how they started up in the first place, and simply expanded to be agents for other people.

....your comment "If they had some way to allow transfer to a Ltd Co and avoid CGT and Stamp Duty as long as the owners of the new company were identical"

It is possible, sort of, but again specialist Tax advice is needed for each persons situation. Involves introduction of a suitable property as a capital asset into a new business.

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The Landlord Avatar
The Landlord 25th November, 2016 @ 14:51

@Grumpy,
haha @ "pay peanuts and get monkeys" - I can't argue with that.

I've got a little experience with ltd companies, and I can say that in comparison, the accounting for a BTL is relatively straightforward. And the tax breaks available are quite limited, despite how much money you throw at the problem.

I don't think most landlords (because they have 1-3 properties), whether they're operating through a company or not, need to spend 1k on accounting fees. That's probably a large percentage of their profit.

But I agree on your sentiments regarding most accountancy firms! I prefer working with self-employed accountants, and not firms- because they usually just plough through work like a sweatshop!

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mr.spacemaker 25th November, 2016 @ 15:00

@the landlord

that's exactly the situation i found myself in - a rogue tenant with significant rent arrears and huge damage to the property asked to be evicted in order to get legal aid for a deposit protection counter-claim. they would not have got legal aid for a deposit protection counter claim on its own.

win, lose, or settle i was looking at £10k+ just to get my property back and all because i got some very poor advice from my letting agent and his solicitor. if i had returned the deposit before serving S21 (as i wanted to do) i would have avoided most of this cost and the tenant would not have got a penny out of me - they would have left owing me money.

unfortunately for amateur landlords like myself, the law is now quite clear on deposit protection regardless of how bad the tenant is, or how long the tenancy has been in place for (unless of course the original AST ended before april 2007). had i known about the 2015 deregulation act and the deposit protection amnesty that came along with it i would have been fine!!!

i support the deposit protection legislation, but the way it has been implemented with regard to very old tenancies is a complete mess and will probably remain that way as it's generally preferable to settle out of court.
as mentioned, the punishment is often totally unfair when tenants and their solicitors are shamelessly exploiting a law that is supposed to punish rogue landlords, rather than good ones.

if you're a landlord that is holding a deposit that was not protected within the 30 day time limit you should give it back immediately, even if you're not planning to evict. it won't prevent the tenants from bringing a deposit protection case against you, but it will help ensure that an S21 eviction will succeed if it ever comes around, and it will also mean that they have to spend their own money on solicitors and court costs. perhaps more importantly, the fact that you returned it as soon as you realised, will probably encourage a judge to go for the minimum sanction if it gets that far.

also, if you do not have proof that PI was served correctly and in time then you should return the deposit before thinking about any eviction proceedings, even if the deposit itself was protected in time.

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Grumpy 25th November, 2016 @ 15:00

@ Landlord,

yes I agree, a small number of properties mean a low cost bookkeeping service is perfectly adequate, as soon as you go to a Ltd company and the accountant has "liability / due diligence" also jumps up, share holders, share classes etc need addressing and the price goes up.

Hence, the move to Ltd companies by the Buy to Let market is not really going to get very far..... people will be forced to sell. Thats the agenda / goal.

Heyho....cant wait for your next rant.....

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David 25th November, 2016 @ 16:23

@MrSpacemaker

Just to point out that you are only better off giving it back on a pre 2007 tenancy that went periodic after April 2007.

It is a case of the law at the time applying as I explained above.

There is no one rule for all tenancies and the law at time also means case law, so cases in higher courts which are binding on lower courts.

Dogs Dinner

Best advice is protect your deposit in an approved scheme because it shows you tried, even if you have to give it backupon solicitors advice pre S21 should your tenancy date dictate that.

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mr.spacemaker 25th November, 2016 @ 16:41

@david

it's true that according to current law i was almost 10yrs late in protecting the deposit, but until superstrike and the 2015 deregulation act that law did NOT apply to me. as you know, my original AST started before deposit protection was mandatory but became an SPT (two fucking weeks!!!!) after. there is still an argument that it outside of the 6yr limit to bring a claim of that nature.

it's only in recent times that the start of the tenancy has been deemed to be when the tenancy became periodic and it really is that seemingly simple thing that has ruined everything for me.

to make matters worse, the original letting agent have been holding the deposit in their client account the entire time and i protected it as soon as i was told that i had to!!!

unfortunately, i am learning the hard way what more experienced landlords have know for years - you need to conclude the legal proceedings as soon as possible so if there is any chance to settle then that is the best course of action (no matter how painful or upsetting it may be), as the legal fees far outweigh any sanction. you're getting scammed, but you have to suck it up, unless you want to spend a lot of money on legal fees proving a point. if only i had had more money to throw at it!!!

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mr.spacemaker 25th November, 2016 @ 17:01

regarding deposits, i very much like the idea of saving the paperwork (and associated potential for eviction complications) by not taking a deposit at all.

surely you can take 2 months rent up front, and advise the tenants that they must always have a month in hand and that as a precaution you will serve section 21 notice as soon as they miss a rent payment (if they miss a rent payment)?

surely it would also be possible to make deductions for damage anyway?
in most cases a good reference would be important so you could refuse to give it until the tenant has paid you for any damage. you would have to take the damage as a separate payment, not from the rent you're holding so it's clear that the rent is not being treated as a deposit, but i can't think of any other reason why this would be a problem?

regarding housing benefit tenants, they are an absolute nightmare and the benefits department will always indirectly add a huge cost to any eviction, by forcing the tenant to drag it out as long as humanly possible. the law needs changing as landlords are basically forced to discriminate against anyone that is receiving housing benefit (or is likely to do so in the future).

the other side of this is that it's making it very difficult for housing benefit tenants to find accommodation - this situation is not good for them either, especially as in many areas housing benefit is capped way below market rates.

in the short-term it's attractive for the council to drag out an eviction as they save a bit of money on rent payments, but it's a foolish policy and they are just going to end up with a housing crisis that can't be fixed - landlords with any sense will go out of their way (even more than before!!) to avoid housing benefit tenants. it's ludicrous that the standard advice from any council is 'get evicted' and then we will help you....

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Simon Pambin 25th November, 2016 @ 17:43

@mr.spacemaker

You have to be very careful about your terminology: as soon as you talk about making "deductions", it starts to sound like a deposit. If it looks like a duck, or quacks like a duck, your goose is cooked. The only thing you can use rent paid in advance for is as a bit of a cushion against a missed rent payment.

You can still charge a tenant directly for damage, of course, but, short of resorting to legal proceedings, you have no real leverage. The threat of a poor reference may be an incentive for some, but not everybody.

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mr.spacemaker 25th November, 2016 @ 18:03

@david

just saw your other post "Just to point out that you are only better off giving it back on a pre 2007 tenancy that went periodic after April 2007."

good point re rules being different for different tenancies - that's why i'm in such a mess!

what would you suggest for my other tenancy then? it's 2013, deposit protected and PI served correctly at the start of the tenancy, but PI not re-served when it went periodic.

i was seriously considering giving the deposit back just to be safe, even though i'm happy with the tenant and certainly not planning an eviction any time soon....

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Simon Pambin 25th November, 2016 @ 18:10

Out of interest, if you had potential tenants who passed all the usual checks and generally seemed like a good prospect, but who had sued a previous landlord for non-protection of the deposit, would you take them on, or look for someone else?

(Assume, for the sake of argument, that the earlier landlord wasn't a complete scumbag.)

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mr.spacemaker 25th November, 2016 @ 18:21

@simon

absolutely not - it means that if they have a chance, they will screw you over. no different to people that lie through their teeth in order to get compensation in an accident, or feign illness to get benefits. these are not nice good honest people - they are money grabbing shitbags!!

n.b. I'm obviously only talking about the small minority that do LIE and FAKE, their are plenty of people that genuinely deserve compensation and/or benefits....

an honest tenant might use the threat of suing in order to get all/most of their deposit back, but that's it - they wouldn't take you to the cleaners just because they can.

i really don't understand why the sanction doesn't go to the government. if it did then tenant's would only pursue it if the landlord really was a rogue. then some or all of it could go to then tenant if they had actually suffered some sort of loss or stress, rather than it just going to them automatically.

i think it's a moot point though as many of these money grabbing shitbags will negotiate an out if court settlement that allows them to walk away with no arrears and a good reference - you'd have no way of knowing.....

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mr.spacemaker 25th November, 2016 @ 18:21

*there!!! fucking autocorrect

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John 25th November, 2016 @ 18:27

Julie - check the lease - my leases categorically state No Deposit is taken and the tenant signs it.
I am alsways holding 1 month and one weeks rent in advance. When I used to take a deposit I used to take one month and one weeks advance rent. Now I just take 5 weeks rent.

Simples
John

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David 25th November, 2016 @ 19:30

@MrSpacemaker

As I have said you have great mitigation, the law and your obligations changed back and forth.

You took advice from Agent, they held the deposit and gave you professional advice.

If they gave you that advice in an email or letter (or if you can get them to confirm they gave this advice) I would consider taking legal action against them under their PI insurance.

Regarding deposits and advanced rent, I thought I made it clear above, if you use rent as a deposit (for the performance of the contract) it is in effect a deposit, not just for damages but as I made clear to @Julie if you are asked to be in excess at the time of leaving I would feel VERY confident asking a Judge to consider it a deposit.

Re Councils forcing tenants to wait for eviction by bailiff be patient, Law is being drafted right now because incompetant Councils are not following guidance.

I agree that it is making it very difficult for any DSS claimants, I have also made the point about a dozen times on this site that it is not Landlords that are choosing to exclude HB tenants it is the LHA rate that caps the rent which makes it a non starter. However, I would point out that ANY tenant can have a change of circumstances and then over occupancy also applies.

The answer is to build millions of new homes at the low end, then market forces of supply and demand will balance rents.

What is nuts is that these very same Councils are now asking private landlords to offer tenancies to people on their bidding systems.

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David 25th November, 2016 @ 19:34

@John Tenancies may "categorically state" that the Landlord can charge £30 a day for late rent, it does not overide common law.

I realise that you are making a point about intent (which helps), but if you use it like a deposit it is a deposit.

It should be used up by the time the tenant leaves, if you have to return monies owed it is in effect a deposit.

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John 25th November, 2016 @ 20:02

"if you have to return monies owed it is in effect a deposit."

Yes but by then they are leaving and you will have an inkling if they are vexacious tenants intending to bring a case for taking a deposit not in a scheme (which it isnt).

When I do repay tenants it is recorded in my accounts and the bank transfer as "overpaid rent". My expectation is that they will not pay the last 4 weeks rent (as they paid in advance when started) . In 100% cases of leaving tenants they leave the standing order to run. Hence the return of overpaid rent. Its not common law , or an unfair term or condition of the tenancy. It is just that the tenants cant be ars** to read their tenancy properly and it saves me all the hassle, expense and loss of use of the monies of having a deposit and using a "scheme".

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David 26th November, 2016 @ 01:17

@John

It is your risk and your risk appetite.

I just hope you never have to defend it in front of a Judge because "yes but" will not sway them.

Tenants have 6 to 12 years to take action, luckily you are such a great Landlord that chances are they will not bother.

As mentioned above I know of others doing this but again it is their risk.

I think you might shield yourself if you put in a clause saying at the end of the tenancy they should end their standing order in due course to avoid over payment of rent.

If as you say they never read their tenancy agreements it is unlikely it will reduce your cashflow but you could point to it in the event of any future legal action.

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David 26th November, 2016 @ 01:34

@mr.spacemaker re Comment 45

STOP thinking about giving the deposit back, many Tenant cases are dismissed because a Judge will say "the purpose of this legislation is that deposits are protected in an approved scheme. I am satisfied it was protected"

Returning the deposit does not help you it hurts you EXCEPT where the law says you have to return it, as in your other tenancy.

So to your 2013 tenancy, as long as this was protected in the first 30 days and PI given in same period, then you are fine for the SPT as long as the deposit info on that PI remains the same. I.E. The deposit was not moved from say DPS to TDS.

It is important to make sure you have evidence of the PI being served as we have seen some tenants deny or forget what they have been given.

This was ratified in the Dereg Act, but be aware Superstrike is still in force for SPT effectively for the How to Rent Document listed in my previous post above.

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mr.spacemaker 26th November, 2016 @ 02:09

@david

i'm seriously considering legal action against the solicitors that initially dealt with my S21.
they served the notice without telling me (i only asked them to get it ready and they never sent me the draft to approve).
they told me via the letting agent that i could return the deposit at any point up until the notice expired and i emailed immediately saying that i thought they were incorrect and i needed to withdraw the S21 BEFORE serving notice. i told the letting agent to double check this point and he said the solicitor had told him it was fine as the deposit had been protected months before S21 served. their lack of knowledge has cost me a fortune and there has been no contact from them - not a single response to any email.

regarding taking two months rent in advance instead of a deposit, i was thinking you could always maintain a month in hand until two months before the end of the tenancy (when you would agree that they stop paying). then in the last month you could do an inventory and ask them to pay for any damages (separately) before you give them a reference.

i think it would seem pretty harsh to serve S21 days after a missed payment on a normal contract (monthly payment in advance), but it could be a good safety net and easier to justify to the tenant if it's 'just a precaution' when they are paying two months upfront with no deposit.

if the missed payment does eventually turn out to be the beginning of the end then at least you are ahead of the game and have served S21 notice at the earliest possible opportunity....

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John 26th November, 2016 @ 19:49

It is very clear in my leases and in the receipts given that it is rent in advance. I then also state in the lease no deposit is taken. I would gladly sit in front of a judge and defend this position as it is absolutely clear (to the man on the clapham omnibus) the intention is not to take a deposit.

The landlord can in no way be held responsible for a standing order that continues to be paid and it is only proper that these monies are returned to the tenant.

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The Landlord 26th November, 2016 @ 20:05

In America, I think it's standard to pay the first and last months rent up front, and a deposit on top of that.

I'm not really sure what my point is, other than it does make sense.

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The Landlord 26th November, 2016 @ 20:14

@mr.spacemaker
"they served the notice without telling me" - brutal!

The problem with issuing notices, even as a "precaution", is that it could send the wrong message, and it might piss the tenants off. They'll be wary of the fact that your finger is always on the trigger, and I'm not sure how good that is for relations. Bad situations are almost always more difficult to resolve if there's tension/threats.

With or without a deposit, it's probably always best to communicate when there are arrears issues, and if needs be, work out a payment plan. I'd only send a notice quickly if the tenant was being unreasonable and unwilling to communicate, and in that case, I'd send the notice whether I had a deposit or not.

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mr.spacemaker 27th November, 2016 @ 03:11

@The Landlord

the only problem is that if you're a reasonable person, it's very easy for a tenant to take advantage - only takes a couple of excuses and you're a whole month (or worse) behind.
Also if they are housing benefit then it often takes the council weeks to sort things out when there is a problem.

good point re an itchy trigger finger though - maybe take two months in hand and serve S21 as soon as they only have one month in hand. so if they miss a payment, you give them a whole month to catch up and then if they haven't done so by the time they pay the next month's rent you serve S21 but make it clear that it's just the notice stage and they have at least a couple of months to catch up before you take it any further....this would seem reasonable to most people, no?

at least that way if the arrears get worse, you can start the eviction process sooner.

i can definitely see some tenants being keen to create a situation where there is only one month in hand anyway!!!

will give it some thought before my next tenancy, but i'm veering towards no deposit and they pay first and last months rent when they sign the contract (so no rent payment required on the last month of the tenancy).

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David 27th November, 2016 @ 09:48

@mr.spacemaker

re:55

I do not think you will need legal action against the Solicitor, they should have sent you their terms and a care letter when you instructed them; compare it to what happened. They also have PI and Practice insurance, a carefully drafted letter with a "I would like to resolve this matter amicably to avoid having to escalate this matter to the SRA" should make them listen up.

However, that will only get you your fees back regarding the S21.

It seems to me the person you really have potential action against is the agent, they held the deposit, they failed to protect it; they advised you it did not need protecting. Now these are things you SAY but if you have evidence, emails, letters etc then you have a case for consequential loss due to bad advice given.

Do not show your cards, start by saying you need their help in preparing your case for mitigation and need copies of any emails, letter or phone calls that will show you were attempting to comply with the law. If they do not provide it, do a Subject Access Request in Accordance with Data Protection Act.

Now I do not know if you are going to fight your S21 claim or be your tenant’s bitch and cough up, but despite your definite failure, the only real failure (other than you hiding under a rock for all these years) is the Dereg act June amnesty, in effect a window of 3 months and you are not the professional who should have known.

Now when these cases are fought it comes before a District Judge, they may have a wealth of experience or be newbies but they always bow down to a Barrister, which is why your Solicitor will do all the Donkey work but it will be the Barrister who goes to Court with you.

The other side may get a Barrister too, it really depends who is funding this, either way, despite the fact that Localism Act and Dereg act have tightened up the law, this is an old tenancy so the argument should go as follows:

1. Tenancy Pre 2007
2. Law has flipped back and forth on whether it needed to be protected
3. Agent was one holding the deposit
4. Agent gave explicit and professional advice NOT to protect the deposit
5. Agent finally advised to protect (not return) the deposit
6. Original Solicitors advised not to return deposit yet
7. You have never held the deposit
8. There is mitigation

As I say this case law has been superseded to some extent BUT can still be referred to considering the age of the tenancy, so

AGENT HOLDING THE DEPOSIT
(Draycott & Draycott -v- Hannells Letting Limited [2010] EWHC 217 (QB))

Now we know that quite rightly the Landlord is liable because section 212(9)(a) clearly states

(9)In this Chapter—
(a)references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies,
http://www.legislation.gov.uk/ukpga/2004/34/section/212

However, in

(Draycott & Draycott -v- Hannells Letting Limited [2010] EWHC 217 (QB))

http://www.bailii.org/ew/cases/EWHC/QB/2010/217.html

The Judge went on to say

• In my judgment the Judge was clearly correct on this issue. The words of s.212(9) are clear and unambiguous, and there can be no occasion to look at Hansard or to any other extraneous material to interpret s.214.
• In my view the words in s.214(3)(a) "the person who appears to the court to be holding the deposit" are not otiose. Rather, those words limit the scope of any possible order under s.214(3)(a) to the person holding the deposit, and prevent such an order being made against any other person who would come within the statutory definition of the landlord – for example a letting agent who, at the time of the making of the court order, was not holding the deposit.
• NO SUCH LIMITATION WOULD BE APPROPRIATE IN S.214(4). Unlike s. 214(3), which is an order for restitution made against the holder of the deposit, s.214(4) is penal, as Mr Browne points out. There is no reason why the penalty should be imposed on the person who, at the time the court order is made, happens to be holding the deposit. The penalty should be imposed on a person who is responsible for the failure to comply with s.213. In the present case that is the Defendant, and not the actual landlord (assuming, at this stage, that there has been a non-compliance which attracts an order under s.214(4)).

At this stage you would point out that it was the AGENT that held the deposit from 2007 to 2016, they also advised the Landlord that as a pre 2007 tenancy it did not need to be protected. As they were the professionals you took this advice.

As such, you would like the Court to consider them liable as the person holding the deposit not you.

Now failing this, you remind and ask the Court to reflect that they are allowed to consider the mitigation for your failings, specifically

Okadigbo & Anor v Chan & Anor [2014] EWHC 4729 (QB)

http://www.bailii.org/ew/cases/EWHC/QB/2014/4729.html

This in fact was a very similar case; where a Landlord relied on a Letting Agent:

• Section 214(4) provides that where there has been a failure to comply with the requirements relating to tenancy deposits:
"The court must order the landlord to pay to the applicant a sum of money, not less than the amount of the deposit and not more than three times the amount of the deposit within the period of 30 days beginning with the date of the making of the order."
• That provision is an amendment of the regime which previously applied. The previous rule was that the payment was to be three time the amount of the deposit with no discretion to order any different amount. The effect of the changes made by the amendment was to introduce a discretion for the court to order the landlord to pay part to give not less than the amount of the deposit and not more than three times the amount of the deposit.

• In exercising her discretion under the Act as amended in that way the judge said this at paragraph 18 of her judgment:
"Finally, the Defendant seeks a penalty pursuant to Sections 213 to 215 of the Housing Act 2004. Section 214(4) provides that in the event of a breach, and here the breach is admitted, I must award the Defendant a sum of money not less than the amount of the deposit and not more than three times the deposit. The Defendant contends for the maximum sum which would be three times £1,520, a sum of £4,560. The Claimant contends for one month's rent in the sum of £1,520. I find that the Claimants are not experienced landlords, that this is the first time that they had let out any property and that they were letting out their home. That they quite properly put the matter in the hands of professional managing agents who let them down by not complying with the terms of the Act. I find this case to be at the lowest end of the scale of culpability for non-compliance. And for those reasons I award the sum of £1,520."
• Mr Wellings for the appellants says that this was a wrong exercise of discretion. He submits that the lack of experience as landlords to which the judge referred and the fact that they put the matter in the hands of agents were matters of little weight when set against what he described as a serious failure to comply with the requirements of the Act for a considerable period of time. He recognised realistically that there was a degree of mitigation in that the breach had been admitted and that there was in the event full compliance, albeit only after a period of delay. He contended that the discretion of the judge should, therefore, be set aside and that the appropriate order would be a multiple of twice the appropriate amount of rent.
• In my judgment, however, the judge was entitled to regard the question of culpability as the most relevant factor in determining what order to make and was entitled to find that the culpability in this case fell at the lowest end of the scale for the reasons which she gave. It is not as if the breach was uncorrected and therefore, although the appellants were lacking the protection for a period of some months, in the end matters were put right.

@Mr.Spaceman, I would get your solicitors to respond to the lawyers acting for your tenant, offering to avoid legal fees with a settlement offer of 1x the deposit, with no acceptance of liability in full and final settlement of the matter and that they will be relying on a very similar case:

Okadigbo & Anor v Chan & Anor [2014] EWHC 4729 (QB)

Pointing out that if a reasonable offer is made and not accepted it may affect the matter of costs.

They might also say that if the tenant wishes more they may be better off taking an action against the agent directly.

That way you may ask the Court to not award costs because you made a settlement offer which is materially the same as what the Judge decided (they wasted the time of everyone).

Either way, at the end of it, you go after the agent for all your costs in this matter which are a direct consequence of their BAD ADVICE and claim against their Professional Indemnity insurance.

You have to fight this, or at least seek settlement as outlined here.

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David 27th November, 2016 @ 09:52

@John

I am not wishing to get into some argument with you.

It is easy to say "I would gladly sit in front of a judge and defend this position"

When actually that is really the last thing you want because that playground costs money and you never know which way it will go.

Anyway, like the Landlady I referred to above, you seem happy to take the risk so all is good.

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David 27th November, 2016 @ 09:57

@Landlord

"The problem with issuing notices, even as a "precaution", is that it could send the wrong message, and it might piss the tenants off"

True but until Dereg Act people were issing S21's with the original tenancy, now on new tenancies they have to wait for 4 months to pass.

The Landlady above does it to cover her risk and explains that clearly (she says).

Personally I think it is just easier to protect the deposit, serve the up to date "how to rent" doc, get a PI signed and comply with the law.

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David 27th November, 2016 @ 10:46

@MrSpaceman Re:59

You are right that "if you're a reasonable person, it's very easy for a tenant to take advantage - only takes a couple of excuses and you're a whole month (or worse) behind."

What you have to remember here is there are tenants that will consider you to be a Bank, but if you do not hit back hard they will do it again, some will say they will do it again anyway.

Now I was taught from a young age to pay all bills before you get the red one, but in times of hardship that you can let any bill slide except for the roof over your head. My Grandfather used to work away for long periods at the docks in London and Liverpool; he always gave my Grandmother almost all he earned. One day he came back and the Council had evicted her, she was gone, someone else lived there and the kids were taken into care. Now she was bad at managing money and was too ashamed to tell him, he did not even know where his kids were for 3 months.

Times have changed, but you have to charge as much as you can get away with, increase your rents in accordance with the “market” and get Tenants that are affluent but can't get a mortgage. I guess that means young professionals, but try to determine their values. CALL their old Landlord and ask “would you rent this tenant one of your other properties”.

As stated here

propertyinvestmentproject.co.uk/blog/refusing-dss-tenants-is-discrimination/

You really can’t afford to take on DSS tenants in current climate (benefits have been capped for 5 years, HB is dependent on LHA rate 30th percentile, benefits keep getting suspended which is beyond your control, takes six weeks to be paid direct, get paid 4 weeks in arrears, Councils can’t advise when will be restored because of Data Protection – I could go on).

Now if you are going to be a carpet and allow people to walk all over you I would sell up and put your money into buy2letcars or a John Bogle mutual fund!

If you are going to abandon the deposit then you can’t wait a month to SEE if they repaid, you need to call them every few days for an update, then if not paid within 7 days you escalate. Consider if you waited till the next month was due and they did not pay, you would now issue an S21, they might not pay for another 2 months and so you are 3 months down.

Sadly you can’t assume people will be reasonable, you have to protect yourself, I think taking first and last month PLUS the deposit is the way to go. Moving forward Dereg Act makes things pretty clear on what you need to do (keep up repairs, no revenge evictions, Gas Safety, Energy Certificate, How to Rent, Deposit Protection certificate, PI) it is all about having a procedure of taking the deposit week early to reserve property and serving these papers which you get signed at the time of letting).

IF you decide not to take a deposit I would consider taking 6 month reverting to quarterly payment as the Landlady above does, but specify last few months do not need to be paid on presentation of an S21 form. At least that way you get people that can come up with 6 months’ rent which helps your cash flow, you have an option to get new tenant if rents in local market increase and you are protected from ever having arrears.

Of course this will not protect you if a tenant wants to be thrown out to get into social housing but that is why you try not to take on a tenant in that demographic.

I still say you are better off taking a deposit and following the law (as well as taking several months rent, whether 2 or 6 months) and following the law on protecting.

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Cat 27th November, 2016 @ 15:13

I really am missing the point.....so many landlords spending so much time thinking of creative ways of screwing this system?!? Just lodge the deposit with a protection agency as per the law! They are free and easy to use and you're disadvantaging yourself by taking money up front and not calling it a deposit. You can't use said "advance rent payment" to pay for damage!!
Banging on about timing and methods for issuing section 21 when if you followed the f'ing law you could issue when the hell you wanted to.......maybe the thought of an independent adjudicator deciding what you can reasonably take from a deposit is what puts you off because I can't think of one other valid reason not to protect 🤔🤔
I wonder if all the landlords here plotting and scheming of ways around the law are the same landlords who get the rest of us a bad name 😡😡😡
Yes tenants can be arse holes but work for your fucking profits and manage them in a legitimate way, instead of spending all your efforts avoiding the law!
......and breath!

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mr.spacemaker 27th November, 2016 @ 16:19

@cat

i'm not thinking of ways to screw the system, even though the system screwed me.

what i was suggesting would put more control in the hands of the tenants regarding the deposit as you would be relying on their good nature and honesty in order to get enough money for any damage - the landlords only bargaining chip would be the reference, and bad tenants would not give a toss about that, especially if they have done a lot of damage. it would be much better for good tenants as they will know that the landlord can't take the mick by overcharging for petty repairs.

i've been burned very badly by the changes in deposit legislation and i just feel like i don't want to be at risk of getting caught again if the legislation changes. that's less likely now i've been stung and will endeavour to follow all the landlord news but still, i'm a part-time landlord and i could easily miss something.

i've learned the hard way that damages are a tiny fraction of the cost of a bad tenant so i'd rather risk it by not having a deposit, and taking two months of rent at least gives some protection with regards to arrears, which are the only real stress during the tenancy.....

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David 28th November, 2016 @ 13:25

@Cat

You are right but you are also so very wrong to criticise and ASSuME!

Right, in that people should just figure out the procedure and get it done upfront, in accordance with the latest law.

Wrong, because this post was created to help people who were either not aware of the law or preceded the law and now find themselves in hot water.

Now unless you have a time machine your comments do not really apply to them.

Consider MrSpaceman, his tenancy was pre 2007 so before deposit regs came in.

His agent has always held the deposit

His agent gave him explicit advice saying he did not need to protect the deposit because it was pre 2007 legislation.

The law on his type of tenancy has flipped back and forth with various senior court decisions and new updates to the tenancy deposit legislation. All along his agent has told him he was fine.

Now he has a tenant with only one rent increase in 10 years, the guy is in arrears, on vulnerable list, wants to be evicted so he can get social housing. He was referred to some 3rd party who is seeking the max, even tried to suggest that there were three tenancies due to the one rent increase (total bollocks).

His lawyer told him he did not need to return the deposit before issuing the S21 which was protected some 5 months ago after final advice from the agent that it did now need to be protected.

He then found out that there was a 3 month amnesty period in 2015 when he could have protected the tenancy without sanction (not forgetting that had he evicted rather than supported the tenant over the last 5 years he might also have avoided the sanction).

He then found out from 2nd solicitors that because his AST went SPT just after April 2007 the latter agreement created by statute, means he has to return the deposit before he can issue an S21.

So he is facing paying the other sides costs, his own legal fees, having to re-serve and then to face S214 sanctions on top of that, potentially about £10k.

I think this tenant may have wiped out any "fucking profits" that MrSpaceman may have made on that property to date.

Of course he is concerned that having trusted professionals it may be easier to avoid this risk altogether by simply not taking a deposit against damages but mitigating his risk against a tenant falling behind and exposing him to more debt.

I did advise that for new tenancies things are better, you no longer have to serve an S21 on an anniversary, the S21 A6 (bit.ly/sec21a6) is now a statutory form without the former 23,000 variations that can make it invalid.

Still if he wants to take the risk and simply take more rent upfront that is up to him. We have merely been playing out the various scenarios to help him make that decision.

There is no nefarious plan, just a desire avoid taking one deep and painful up the backside.

Where I agree with you is about protecting it and complying with the law. The fact is that any tenant can fall off the ladder, get behind in their rent and have to be evicted because some Councils are not following guidance.

In many ways taking a bigger deposit and protecting it may be the way to go, taking a 3 month deposit and 4 months’ rent upfront would at least give the Landlord the option to issue an S21 on the first failure to pay rent on the due date, the deposit will be held in the approved scheme, so say 7 days to issue the S21, 2 months’ notice and then potential of bailiffs to evict if the tenant does not go. At least he would be able to claim that 3 month deposit when the tenant has gone and pursue his eviction costs and any outstanding rent over what is held in the scheme. Soon the bailiff route forced by some Councils will be gone as there are white papers coming to make this law (hopefully).

Taking high deposits and upfront rent does to some extent protect a landlord from certain types but of course some drug dealers have access to funds so usual checks need to be made.

An S21 does not need to be served by a lawyer but simply in accordance with the law. Again it is just a procedure.

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andrewa 3rd December, 2016 @ 19:18

Economics 101. If a government wants less of something all they have to do is tax it more heavily and wrap it in red tape. I thought there was a housing shortage in the UK? If so why is the government increasing taxes and red tape for those providing the housing?

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Simon Pambin 4th December, 2016 @ 13:27

It's a nice bit of smoke and mirrors: the Government gets some extra tax money, they're seen to be doing something to rein in those awful buy-to-letters who are solely responsible for the state of the housing market, and it doesn't hurt their wealthy mates who are rich enough to be able to buy a rental property outright.

Of course, most of the costs will end up being passed on to the tenants, and it'll make bugger all difference to the housing market - you'll still have X number of properties and Y number of people wanting somewhere to live so whether they rent or buy actually makes very little difference - but it gives the impression that they're doing something and, when it comes to politics, that's all that matters.

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TenantLord 10th December, 2016 @ 14:59

AndrewA, Simon - there are actually some good reasons for govt to dislike BTL as it operates now, even if you ignore the (overblown inaccurate and unfair, IMO) caricature of greedy profiteers.

UK PRS has v high proportion of small llords, who while offering vital supply, also tend to struggle with property improvement, and can br ruined if interest rates rise fast. You end up with a PRS with a lot of churn, unhappy tenants, happy agents, and vulture finance waiting to pick off the weakest but not staying to improve stock.

Govt would be sensible to want fewer, bigger PRS Llords, who could be expected to meet housing standards, be regulated more easily, and be comfortable with offering stability of tenure to those who desire it. They'd also be the people who could be tempted to build more PRS at scale.

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Simon Pambin 10th December, 2016 @ 17:20

@TenantLord

You have to wonder why it is the case that the UK private rental sector isn't dominated by bigger players, given that it's a contestable market: barring the need for a bit of capital and finance, there aren't really any barriers to entry.

If anything, given that there are clear economies of scale in terms of the administrative burden and access to maintenance contractors etc, you'd think it would be susceptible to domination by a few big players, with small landlords left to pick up the crumbs in niche areas of the market. I can only conclude that there's not enough money in it, which in turn makes me wonder why people readily accuse so-called buy-to-letters of profiteering.

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tenantlord 11th December, 2016 @ 03:47

it's largely a historical thing, I reckon. UK went from a huge largely unregulated PRS, to a very strictly restricted PRS which basically made being a commercial landlord at scale almost impossible, esp as competing with huge direct social housing by local govt/HAs and large scale home ownership.

So, when the PRS was opened up again, almost the only way the market could seriously expand was through small LLords.

I suspect council house sales helped too- the sort of people who might have been the target market for bigger residential firms could just buy their home at a big discount instead, so how could a "big" Landord compete with that?

I sometimes wish some of the better HAs would step into the gap now but they lack the risk appetite (and possibly capital) for major expansion.

Only area where this didn't really apply was the student market, and there the bigger providers have expanded a fair bit - offering a pretty decent homogenous product to a very specific market which most small Landlords can't match - and using scale to Maybe some of them will move from student market to young professional lets?

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Grumpy 13th December, 2016 @ 13:29

@SimonPambin

"I can only conclude that there's not enough money in it, which in turn makes me wonder why people readily accuse so-called buy-to-letters of profiteering."

Well said.... unless you have property from years ago, more or less paid off, the returns are pretty shitty. The only reason people bought them was the huge capital appreciation that came about during the interest rate drop from 15% to 0 over the past decades.

For anyone to buy a small house/property now must be off their head.

As you say the economies of scale help to a degree, but smaller Private landlords often will be working to do repairs / maintenance and viewings etc on their own time for what amounts to less than minimum wage!

There is an argument that the PRS helps keep the rents down, an individual with a rental house wants it let all the time, and will be more willing to cut the rent to keep it occupied than a large corporate property owner with enough slack to hold out and say take it or leave it.

Forcing the housing rental stock into the hands of some large conglomerate is not going to benefit anyone!

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Ceri 5th February, 2017 @ 02:20

I forgot to protect my tenants deposit within the 30 days. The rent started 1st July I did attempt to protect the deposit on 29th Sept but the fee did not go through (i do have a copy of the cancelled invoice) I then attempted again on 31st October successfully once i received notification of the earlier failure. The tenant moved out at the end of the 6 month agreement and deposit was returned. I have now received a letter requesting compensation as the deposit was not protected within the 30days, otherwise start court proceedings.
What can i do?

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mr.spacemaker 5th February, 2017 @ 08:55

Unfortunately, you're definitely in breach and there is no way out of it.

If you go to court, the judge will have no choice to award the full deposit amount, plus 1x, 2x, or even 3x as a sanction.

Your attempts to protect may help avoid a 3x sanction but that's it.

So, awful as it may sound, best case scenario is to give the tenant double the amount of the deposit, and the sooner you do that, the less chance of legal fees.....

Bear in mind that they may be paying legal fees currently, and this will help with negotiation. They may be bullshitting with a solicitors letter (always advisable when trying to get money from someone).

Read all of the advice at the top of this page, especially this bit:-

"You have three options:
Pay what they demand
Fight in Court
Negotiate"

*remember, you need to come to terms with the fact that double the deposit is the MINIMUM you will lose in court, so anything less than this is a massive bonus. Hopefully the tenant will be more interested in quick easy money than a long fight for that amount....

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David 5th February, 2017 @ 13:37

@Ceri

I am afraid MrSpacemaker is right, everything you need to mitigate your loss is above including letters you might write. Read every post and the associated thread which has about 5 years of similar experiences.

Bear in mind the goal here for BOTH parties is a settlement, for both sides it can be like a game of P O K E R but in your case you have more to lose.

My general approach is that if you were a decent landlord you end up paying 1x the deposit, if you were a bit overbearing and charged for things like redecorating you might be looking at 2x and if you did not carry out repairs and can come off as a bad landlord then 3x is a possibility. It also works the other way, if the tenant was in arrears and you used S21 to get rid of them a Judge can give you the minimum.

It all depends on the Judge you get on the day, I have seen some realise that the tenant is trying it on and force them to appeal (which exposes them to costs), they literally said "well I find that the deposit WAS protected" even though the law says it has to be done within 30 days.

You did not say whether it was the tenant who wrote or a lawyer or claim company.

A claim company do not want to negotiate, they want to go to Court so they can get legal fees and give the tenant the sanction they obtain.

A tenant advised my a mate in the pub just wants to get a simple pay day.

If you have a claim company, reach out to the tenant direct, see if they will accept a settlement of 1x deposit and a decent reference.

The difficulty you face is that even on your first attempt it was not within 30 days for the deposit or the Prescribed Information.

However, if you are a novice landlord you can use that as mitigation.

The key is to get the tenant to realise that it is not a certaintly that they win in Court, so they are better to settle for 1x the deposit as free money now than risk going to Court. The reference has real value to them if they are in the private rental sector.

Please feel free to ask questions and provide more detail to your case.

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mr.spacemaker 5th February, 2017 @ 16:06

Bang on the money as usual David.

I wouldn't mind your opinion on something actually....

I think the whole reason my tenant got legal aid is because I started S21 proceedings that were not valid (thanks to the various changes in deposit protection law).

I was under the impression that I needed to refund the deposit before giving S21 notice, but my letting agent advised me otherwise (on the advice of their solicitor who I paid to issue notice). Also, when it came time to issue the notice, for reasons unknown, they failed to check with me before sending it.
After the notice was sent, they told me not to worry, and that I just needed to refund it before taking the S21 to court. In the end they told me to risk not refunding it, as it was protected, and in their opinion the tenant was keen to leave anyway.

The counterclaim to the S21 has cost in excess of £15,000 and I feel that most of this would have been avoided if they had let me refund the deposit. My email after the S21 notice actually said "I think I should withdraw the notice, refund the deposit, and issue notice again."

Should I be pursuing the letting agent, their solicitor, or both for some of my costs?
n.b. I did not have a full maintenance contract, I just paid the agent and their solicitor to do the eviction.

They should have picked up on the fact that the S21 was invalid, and they should have known about Superstrike, no? At the very least, they should have looked into it when I specifically questioned it.

Is it worth bothering with, considering that this tenant has cleaned me out and I'm unable to borrow any more money for legal fees? I dread to think what the Solicitors will charge to do this, and I don't think their costs will be recoverable if it's in the small claims court.

Obviously, regardless of these mistakes I would still have been liable for a 1x deposit sanction, but it's unlikely that the tenant would have been able to afford to start legal proceedings and they probably wouldn't have had such a good solicitor.

Thoughts?

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Ceri 6th February, 2017 @ 07:12

Many thanks Mr Spacemaker and David, I do understand I will be putting a letter together to send back with a counter offer.
It was a letter from ex tenant at this stage, I did not charge any costs when he moved out I refunded the full deposit.
I have to step back from my feelings that he is taking this route when everything has been more than amicable. During the 6 months he rented the property I had a new boiler, heating system and kitchen installed. Even helped him out with furniture.
I have definitely learned a valuable lesson and I can see why landlords do start to toughen up.

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David 6th February, 2017 @ 14:09

@MrSpaceman

I remember your case, it was one of the most unfair just because you were caught between the dates.

There are two legal routes for you, breach of contract and Professional Indemnity.

I always advise people to use a Lawyer who is an expert in the area of law they are using, for Professional Indemnity that is Irwin Mitchell. They are not cheap but they will tell you if you have a case, albeit that the initial advice may cost you £500 to £2000.

For breach of contract the agent may say "he was only on the minimum service level" BUT they gave the advice and you reasonably accepted that advice from them in a professional capacity hence the PI claim.

I think you have an option to negotiate a settlement by approaching them and asking for the name of their professional indemnity insurers.

They will ask why and you can say "I am preparing a legal claim against you", obviously this will scare them so they will want to talk.

At this point you tell them you have incurred £15k of costs based on their professional advice and you ask them for their firm proposals to settle the matter or else give you the name of their insurers.

With regard to their solicitors, unless they gave you direct advice it is for the agent to conjoin them in the case.

You or the agent could put a complaint into the SRA but that will take at least 6 months and I would not hold your breath.

What you can do is get "something" from the agent to avoid it becoming legal. You can say to them that they can avoid further legal costs by entering into a settlement with you.

What you can expect is the IM will prepare a case if there is one, they will write to the Agent with a letter before action, by this time you will have run up perhaps £2k of costs so it adds to any settlement being cheaper before action.

If they pass to their insurers you will have two top tier lawyers fighting it out (which is why you need IM in the first place) they can do this for 2 years running up costs for both sides. The insurance company has deeper pockets, will use every trick in the book to delay delay delay.

If the agent gave you advice at a time when the law made it correct then you are stuffed, I think the issue is that they advised you that you did not need to protect the deposit and that led to the potential for claim, so a consequential loss. Also they wrongly advised you to go S21, so in your settlement you are looking at the costs of that element.

These days courts are playgrounds for the wealthy but if you can appear to be angry enough, draft a reasonable claim that they believe they might lose, then you might get a settlement.

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David 6th February, 2017 @ 14:20

@Ceri

It is not so much that you toughen up but as the article says, you comply with the law. Check out the related links above about your obligations.

Since Oct 2015 they are harder, you now need a Gas Safety, Energy Performance and a How to Rent booklet as well as the Prescribed Info.

Failure to do these can void an S21, a clever tenant looking to delay a move would not tell you until the 2 months are up.

Some of the Deposit Takers try to produce the PI in their paperwork but they fail to provide certain information which may leave a landlord feeling they complied but still have things to do.

This is a business, create the processes and a checklist of all you need to do, in the order you need to do it and with the verification documentation to provide you did it.

For example, instead of taking the deposit when you start the tenancy, create a pre-acceptance stage, you get the tenant to provide the deposit at a meeting to secure the tenancy, say a week before the tenancy starts.

You protect that deposit, create the PI, add it and all the other paperwork as appendices to your tenancy agreement, then you create the two copies and have the tenant sign both including signing the copies of the PI, Gas Safety, Energy Performance and How to Rent. All of these are done when you hand over the keys and go through the inventory.

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Grumpy 6th February, 2017 @ 15:14

@mr spaceman
To add my wee penny's worth to davids excellent advice....

Try small claims court. It's limited to £10k claims but there is little downside for you. Win or lose you will notI get hit with the other sides a legal costs.

Folllow davids advice but use the small claims track and file for damages of £10k

They will likely try to brazen it out but if they provided incorrect advice as you say, they will NOT want you to file the claim with the Court as they will almost certainly lose.

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