Here is a question to the blog clinic from Nat who is a landlord:
One of my tenants has just moved out and I have realised that a change in my rent collection system (I changed the rent due date) in 2006 resulted in an underpayment on her part.
She maintains she has paid every month since she has moved in but can’t prove it because her bank does not have statement details before 2009.
I have offered to waive the money owed from 2006 if she pays the sum I believe she owes as a final settlement. She is adamant that she owes nothing and is claiming that I actually owe her a refund.
The best way to prove the underpayment is to do a proper schedule of arrears. Do it in a spreadsheet (eg Excel) and do a separate entry for every day the rent fell due and every payment made by the tenant, with a running total up the side.
For a tenant who has been in the property a long time it may be a long job, but it is the only way to prove the arrears.
It should end up looking something like this
NRM says
July 30, 2014 at 12:46 PMYou say ‘her bank does not have statement details before 2009’.
Why should the tenant have to prove anything, if you as the L/L believe this, then ask your own bank for statement details.
A spreadsheet is only as good as the info entered. Unfortunately no matter what info you enter, it does not prove that this is owed or due.
If you do however have all the statements from your own account to put against this info, then this should be enough to indicate what is owed by the tenant…or by the L/L.
Tessa Shepperson says
July 30, 2014 at 1:24 PMNo, it does not prove it of itself but compiling a proper statement is the first stage.
Obviously the landlord should only enter correct information and should be in a position to prove any of it if challenged. For example by having bank statements handy.
If, for example, this was in a court case, the landlord would verify that the statement was true, if necessary on oath. The tenant would then be expected to prove that it was wrong, ie that additional payments were made other than those in the statement.
For example with the statement above, the tenant could say “What about the payment of rent I paid you on 10 Jan for £500, here is a copy of my receipt”. If that was agreed, then the statement could be amended.
Having a proper clear statement like the one above is the best way to work out what the issues are. If you don’t have that, then everything is in a muddle.
Colin Lunt says
July 30, 2014 at 4:19 PMI am just speculating, but would it be possible that a tenant could use an estoppel defence given that the ‘debt’ has existed for 8 years, with presumably no previous attempt to claim (apologies to non-lawyers, estoppel is a promise or forebearance on which another party relies can not later be changed)
This would I think make it very difficult for the landlord to pursue.
Coventry Man says
July 30, 2014 at 4:28 PMMay there be a limitation point here? Rent is normally only recoverable for 6 years. So it might be too late.
Tessa Shepperson says
July 30, 2014 at 4:39 PM@Coventry Man – well I’m not so sure.
If £300 rent is unpaid (say) in January and then rent is paid in full in February and for the following months – surely the first £300 of the subsequent payments go to pay the shortfall on the preceding month?
In which case the arrears are always for the most recent months and no limitation problem should lie.
Colin – that may answer your estoppel point too.
Coventry Man says
July 30, 2014 at 4:56 PMIt depends. The normal rule is that it is the payer who allocates payment, failing which the recipient can do so.
If the tenant sends £300 as Feb Rent the landlord can’t use it for January. And it sounds as if the landlord didn’t allocate it either.
The answer is to check all rent accounts regularly.
Industry Observer says
July 30, 2014 at 8:33 PMDon’t think so Coventry Man I think tessa is nearer the truth.
There is an accounting protocol that you apply the most recent payment to the longest outstanding debt. Otherwise you simply make a debtor look worse than they are when they have made every payment for the last 5 years except the very first – so you claim they have owed you £x for 5 years.
When in fact they owe you one month’s rent
Everyone seems to be not commenting on something that struck me immediately I read it – the Landlord “changed the rent due date” Really – how did he arbitrarily manage that then?
My advice is give it up. No way will a Court siupport you in this and who knows, maybe the tenant is right and you owe her. Give it up is my advice
Coventry Man says
July 30, 2014 at 11:18 PMI agree with Industry Observer that it isn’t worth pursuing. But the doctrine of Appropriation of Debts, as I said, will apply unless neither party explains what the payment relates to, in which case it is treated as paying the earlier debt, as IO says.
The moral is not to leave checking your accounts for so long.
Romain says
July 31, 2014 at 8:46 AMUnless the payer specifically states what the payment is for the payee can allocate it to any outstanding debt, not just the earliest one.
Rent payments are rarely accompanied by a note stating to what they correspond, so Tessa’s suggestion is the ‘normal’ way to proceed, indeed.
Industry Observer says
July 31, 2014 at 10:17 AMhttp://en.wikipedia.org/wiki/Devaynes_v_Noble
Sorry but there is a specific doctrine that relates to application of payments received. I had forgotten the name, just knerw it existed. Coventry Man has kindly refreshed my memory, and the link above is but one of many that explain and confirm it.
Unless the payer specifies what a payment is to be applied to, the payee recipient under accounting protocol is deemed to apply it to the oldest debt.
Tessa Shepperson says
July 31, 2014 at 10:28 AMThanks Industry Observer, that is very helpful.
Although I agree that debts should also be specifically followed up at the time.
Landlords bothered about what to do will find some free guidance here http://landlordlawstore.co.uk/free-rent-arrears-guide/
Romain says
July 31, 2014 at 10:59 AMThat case applies if neither parties appropriate the payment to a specific debt (ie. non-one says anything) and there is a single, running account.
But as said, when making a payment the debtor (tenant) has the right to appropriate it to a specific debt, and if he does not the creditor (landlord) can appropriate it to any outstanding debt, which indeed is often the oldest one because it is advantageous to do so. My understanding is that the creditor must declare the appropriation he is making, though. Otherwise Devaynes v. Noble applies.
Colin Lunt says
July 31, 2014 at 2:49 PMThe main point in this issue is that neither the landlord nor tenant either knew or made any reference to the alleged debt for the period of 8 years. Therefore neither of them can have nor be deemed to have allocated normal rental payments to debt or current liability.
The rent account had in both parties minds been up to date until the landlord thought otherwise. The tenant could not pay a debt of which they had no knowledge and likewise the landlord would perhaps have said to the tenant that they had overpaid if they were offered more than what both parties beleived the rent to be.
I am still of the opinion that an estoppel would a potential defence but would agree with the other suggestions if both parties KNEW that there were arrears.
The key to the proof would have been the suggested rent account in Tessa’s first commentand and copy of issued receipts.
Chester says
August 3, 2014 at 9:39 AMThank you for answering my question, Tessa, and thank you everyone else for your helpful replies.
You are right in that we have always allocated each payment to the earliest invoice and thus the statute of limitations doesn’t apply here as the debt is only for the last month unpaid.
We have supplied the tennant with our spreadsheet which clearly shows that there is a shortfall but, as NRM has pointed out, it is subject to human error and the tennant is asking us to prove it is not.
We did contact the tennant in 2002 to tell her there was a shortfall. Unfortunately, we identified the wrong month as the culprit. The tennant says she checked her bank account at the time, saw that the rent had gone out for the stated month and took no further action.
She is asking us to prove through bank statements that we did not receive the rent for the correct month. However, we receive rent from many, many tennants. Presumably, it would be necessary to provide three month’s worth of statements showing the two payments either side of the missed one, and to ‘redact’ the details of all the other tennants?
We do actually owe the tennant some rent (she failed to cancel her standing order for the month after she moved out), it is just the amount that is in question. We also have not repaid her deposit or a sum negotiated for some damage that occurred to her property through the fault of a contractor we employed. We are retaining these sums so that we can pay everything in one final cheque.