Here is a question to the blog clinic from Jeremy on behalf of a tenant.
A friend, a student from India whom we keep an eye on has just moved to London to start an MA and has moved into a flat, sharing with one other.
She has been told that the system in London is that she pays the deposit to the outgoing tenant. The flat is part furnished, there is a stricture that all furniture brought in has to be removed, and it hasn’t and if that is the case it will be removed at tenant’s expense. there is no inventory at the time of change over some items are broken. She is concerned that she may never get her deposit back…..
Has yet to sign the rather scrappy looking contract…should she or should she in fact walk?
Answer
My feeling is that she should walk. If she can find another property.
If she pays the deposit to another tenant, that means that the landlord is not responsible for it (as it has not been paid to him) and so it will almost certainly not be properly protected in a tenancy deposit scheme under her name.
So her only chance of getting back the deposit is to get it paid by another tenant when she moves out.
It does not sound good to me.
What do readers think? Have you experienced this sitaution? What happened?
Thank you for this helpful advice. The person in question, persisted with the agents, who were less than helpful but eventually agreed to take her deposit on behalf of the landlord on this “exceptional” occasion.
She’s still concerned about not having an inventory but has taken lots of photos of the place, which I guess will help. Her difficulty was that she had already moved in and was finding it hard to find another place to shift to as she was starting her Masters course that week.
Not having an inventory prepared at the time she took over works in her favour.
It is up to the landlord to justify any deductions from the deposit to the deposit protection scheme (if tenant objects), and without an inventory the landlord has no way of proving what was there or what state the property was in when she moved in.
Thats excellent news. The agents will now be liable jointly with the landlord if the deposit is not dealt with properly.
This is indeed quite common in London where someone comes in as a replacement tenant on an assignment of tenancy. it saves the agents time and money if they don’t have to deal with payments and refunds; seems to be a way of cutting corners (and costs). This even with deposit protection – and sometimes reminding agents of the relevant deposit protection rules can help! But it does mean checking up on where the deposit’s protected and what the scheme rules say . . . and students in particular are often unaware of deposit protection, or just have a hazy idea of what it’s about.
Tell her to make sure she keeps the receipt or bank statement or details of the scheme where her money is held safely with her other renting papers – she doesn’t want to get to the end of the tenancy and the letting agents deny all knowledge.
If there are any queries, it is better to sort them out now rather than in two or three year’s time!
She needs to receive the deposit protection certificate and to report them if she doesn’t receive it within 30 days of payment. Presumably she has proof in writing that they were accepting the tenancy deposit on behalf of landlord.
Has she been issued with all of the other required paperwork for the tenancy? Tenancy agreement, Copy of Gas cert, Electrical cert, EPC, How to rent booklet.
Does she know which ombudsman the agency belong to? Its worth noting this and the agencies complaints procedure, so that she has it for future reference.
Do they have client money protection in place?
If its not a protected deposit, wouldnt this be a prohibited payment under s1(1) or 2(1) of the TFA2019?
Maybe, but it is not paid to the landlord, it is paid to another tenant! So the landlord could deny all knowledge of it.
Tenants often want to deal with the deposit in this way, but unless it is a long standing tenant we always insist on the new tenant passing the rent and deposit directly to us and we then arrange the deposit return to the outgoing tenant. At the end of the day if a deposit has been paid to us and we are not involved with the return of that deposit, the tenant could one day declare that it was not repaid to them by us and we would be responsible for the payment!
Just come across a tenancy agreement issued by a London letting agent that does factor in the possibility of a change of tenant/assignment with landlord’s/agent’s permission. As they do. But it also stipulates that in such a case the tenants
“Financially recompense one another outside of the scope of the applicable Tenancy Deposit
Protection Scheme, for repayment of any share of the Deposit that may become due to a
departing Joint Tenant. This includes the recompense of interest earned to date.”
If the landlord or Landlord’s agent direct that the deposit be paid to a particular person, would that not then be deemed as paid to the landlord?
“What do readers think? Have you experienced this sitaution?”
This appears to be a common approach by landlords and agents that let “shared” houses, based on threads on landlord forums.
They seem to think that it makes life easier, when in reality it is making problems down the line likely.
Thy are almost certainly responsible for complying with deposit protection legislation, which they may fail to do.
They almost certainly do not use a deed to transfer the tenancy (if that is what they intend).
They do not do an inventory at handover so they don’t know who to claim from for any damage.
The way to deal with a deposit on assignment of a tenancy is to include the deposit in the assignment and to give notice of the assignment of the deposit to whomever is under an obligation to return it. If that is done then all rights in the deposit pass to the new tenant on the date of the notice. See section 136 Law of Property Act 1925.
In practice do they really assign anything as such? I didn’t think you actually could. I always thought the in-coming tenant simply gets pressured to pay money directly to the outgoing tenant and pays their share of the rent to the agent as a temporary sub-tenant of the existing household until the contract comes up for renewal which is commonly only a month or two later.
I really don’t see why the in-coming tenant can’t hand over cash to the landlord or agent and get a receipt and then in the same breath the cash can be passed to the outgoing tenant sitting next to him and who simultaneously signs something for the deposit people or emails them with the new tenant’s details.