Is an AST effective if the deposit has not been paid in full?

by Readers Question

9:05 AM, 22nd August 2016
About 2 years ago

Is an AST effective if the deposit has not been paid in full?

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Is an AST effective if the deposit has not been paid in full?

I allowed a DSS couple have access to an empty 2 bed mid terraced property on the basis that their DSS application would be successful and all monies concluded within four working days. when

Today fourteen working days have passed and deposit monies have not been collected in full £250 of £595 due. No rental money has been received. I continue to receive explanations that the delays are due to waiting for receipt of allowances from the DSS.

I have explained that the AST has not become effective and that they should leave the property soon.

Is this correct or am I subject to all rules of the Housing Act.

Thank you for your inputs

Mike



Comments

Mark Trenfield

12:57 PM, 22nd August 2016
About 2 years ago

Hi Mike,
I am not a legal expert (although I have huge experience in dealing with DSS tenants and local Councils).

Given that you have given the tenants the keys to your property and you have allowed them to move in would indicate that you intended to create an Assured Shorthold Tenancy with these DSS tenants and you are therefore bound by the full terms of the Housing Act.

In my opinion - the current deposit payment situation is irrelevant in relation to whether an AST has been created or not - because an AST can be created with a zero deposit.

By the way - I hope you have protected the £250 deposit in a deposit guarantee scheme - if not - do this ASAP (and within 30 days of creating the tenancy).

In my experience - given that the tenants are on DSS benefits - it's possible that you won't see any more deposit money (because if they had lots of money they wouldn't need to claim benefits). One hope is that your local Council might include you in some form of Council run "Deposit Guarantee Scheme".

The delays in receiving rent monies may well be caused by the DSS processing their benefits application slowly (assuming they have even submitted a claim).

To gain clarity on what is happening - you need to get your tenants to urgently arrange a meeting with the Housing Officer at your local Council / Benefits Office so that you can find out what is going on. It is really important that you attend this meeting with your tenants.

At the meeting you should find out what the delay is (in processing the tenant's claim) and you can also gain clarity on whether you are likely to see any more of the deposit or not or whether you are eligible for a Council run deposit guarantee scheme.

You could also ask whether the Council would be willing to pay the Housing Benefit money directly to your bank account given the problems that are already beginning to surface within this tenancy after only 14 working days.

Hope this helps ....

Mark

Michael Jones

13:27 PM, 22nd August 2016
About 2 years ago

Mark, Thank you for your guidance I will get going on this via the DSS Housing dept, my deposits and ensure tenants are in enjoyment of the property.

David Price

14:54 PM, 22nd August 2016
About 2 years ago

Reply to the comment left by "Mark Trenfield" at "22/08/2016 - 12:57":

"By the way – I hope you have protected the £250 deposit in a deposit guarantee scheme – if not – do this ASAP (and within 30 days of creating the tenancy)."
Small but significant correction Mark - within 30 days of receiving the deposit - which of course may be sometime before creating the tenancy.
Don't forget to serve the protection documents on anyone who loaned the tenant the deposit, this applies even if you have not been informed that the deposit was borrowed.

Michael learn from your mistake, everything must be in place before you grant a tenancy. Take the deposit in full or accept that what you have is all you will get. Go to the council with the tenant to ensure that the claim is made properly, get the tenant to sign your copy of all the documents, How to Rent booklet, EPC etc, take copies of the prospective tenants passport and don't listen to any stories about how it will be produced tomorrow, before any AST is signed.

Tenants, particularly those on benefit, cannot be trusted and when they have a roof over their head they will forget all the promises.

And please take all the tenants on Universal Credit so that I do not have to.

Gary Nock

14:59 PM, 22nd August 2016
About 2 years ago

Mike - Mark is right. An AST does not have to be in writing and can be created verbally. By allowing them access to the property you have created an AST. The fact you only have a part deposit is irrelevant. Get it protected anyway. Although I refuse to deal with Local Authorities on Housing benefit I would never allow access to one of mine or another landlords properties without the full deposit and first months rent paid in cleared funds on or before the day of commencement. This is also to satisfy my block rent insurance guarantee on all my properties. If someone on benefits wants to rent one if my properties they get referenced and provide a guarantor with a Deed of Guarantee - who also gets referenced. No guarantor - no property. I know it seems harsh but having had my fingers burned by local authorities and housing benefit in the past.

Michael Jones

15:00 PM, 22nd August 2016
About 2 years ago

David, There is need to be firm and fair, people change tune when they receive what they want for less than the agreed value. A care free attitude of the recipient kicks in, regardless of the relaxed caution of the provider. Human nature, eh ?

Michael Jones

15:05 PM, 22nd August 2016
About 2 years ago

Reply to the comment left by "Michael Jones" at "22/08/2016 - 15:00":

Gary, They went in with a Section 21 letter, hopefully they will be out in 6 months, I will need to do inspections and document my reasons why. All the compliance actions are in hand. Thanks.

Gary Nock

15:36 PM, 22nd August 2016
About 2 years ago

Michael I think I am right in saying that new Section 21 rules came in last year. I don't think you can serve a Section 21 within the first four months of a tenancy. And to have a Section 21 that will get past the judge you will need to show you have served the EPC, Gas Cert, and Deposit Protection Papers.

Rob Crawford

15:42 PM, 22nd August 2016
About 2 years ago

Hi Mike, can you clarify, "They went in with a Section 21 letter"? If the tenancy commenced after October 2015 and you served a section 21 at the start or any other time during the first four months of the start of a tenancy, it will not be valid! You need to serve it after four months from the start and allow two days for it's delivery.

Michael Jones

15:53 PM, 22nd August 2016
About 2 years ago

Reply to the comment left by "Rob Crawford" at "22/08/2016 - 15:42":

Hi Rob, Thank you for the clarification , I will check the S 21 timing with Rent Smart Wales . I have seen notes in NLA referred to as England only.

Mandy Thomson

16:29 PM, 22nd August 2016
About 2 years ago

I agree - an AST has been created, as clearly the intention to do so is there and the tenants now have possession. From an academic perspective, I would say that at best the tenants would be in breach of the AST for arrears. However, taking a more practical view, it's still early days and it's a well known fact that housing benefit is paid in arrears, and moreover there are often administrative delays while the claim is established. I have never let to a tenant on housing benefit, but I believe it's common for landlords to have to wait 2 months for any rent money.

I also agree and would particularly empathise that the deposit must be protected within 30 days of PAYMENT and the prescribed information served on the tenant (make sure this is properly completed, for example, referencing the clauses in the AST relating to the tenant's responsibility to look after the property, as it's not unknown for deposit related prescribed information to be invalidated for this sort of thing.

In addition, as the tenancy is after the Deregulation Act 2015, there is now more prescribed information which must be served on the tenant, namely:

-EPC
-Gas safety certificate (if property has gas)
-a copy of the Government's "How to Rent" booklet

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