My|Deposits Deposit Protection Refund Query – READERS QUESTION

by Readers Question

18:55 PM, 1st January 2013
About 8 years ago

My|Deposits Deposit Protection Refund Query – READERS QUESTION

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My|Deposits Deposit Protection Refund Query – READERS QUESTION

My|Deposits Deposits Protection Query - READERS QUESTIONWe have a house let to three persons and they seem to have fallen out, with the lead tenant (for deposit protection purposes) giving us notice. The deposit is registered with My|Deposits.

My question is what is legally correct?

Do I return the full deposit to the lead tenant or do I give a third of it back to each?

The following background information may also be useful:-

  • As far as we’re aware they paid a third each.
  • Nobody else has any interest in the deposit, other than the three on the contract. We specifically asked that question before we protected it.
  • The tenancy was a six month assured shorthold tenancy which commenced 10th December 2011.
  • We’re happy to start a new tenancy with the remaining two or for them to find a suitable third to share.
  • We’re happy for the remaining two tenants to remain if that’s what they want to do, they’re both working and so should easily be able to afford the rent between them.
  • No replacement tenant has yet been found by them as far as we’re aware. We wouldn’t put a stranger in with them as they are brothers and it’s only a shared house not an HMO.

Thanks for any advice you are able to give me.

Kind regards
Carole Kubicki


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Comments

Mark Alexander

20:01 PM, 1st January 2013
About 8 years ago

Hi Carole

I’ve not come across this scenario personally so other readers may be better placed to offer advice. I would probably meet them, agree a way forward, document it and get all to sign it, refund the deposit as agreed and then start a new tenancy and protect the new deposit. I’m very interested to see if other
readers can come up with alternative suggestions as this will prove useful if ever I encounter a similar scenario.

Mary Latham

22:28 PM, 1st January 2013
About 8 years ago

This is quite common with sharers A joint AST must be treated as joint until it ends. The correct way to deal with a deposit on a joint AST is to return it to the lead tenant at the end of the tenancy with a clear breakdown of any monies that have been withheld, and of course receipts/quotations. It is for the group to decide who is liable to pay any stoppages not for the landlord who should not get involved. This is one of the things that I like most about tenancy protection legislation, in the old days no one ever owned up to damages or losses in the common parts and the landlord was left to sort it out - now it is for the tenants to sort it out because they share, not only the Tenancy but also the lialbity for the whole rent, damages, losses, cleaning etc.and it is the group who have nominated the lead tenant.

Your situation is not unusual but a little more complicated than the situation where the whole group end the tenancy as friends and perhaps, since they have fallen out, it would be wise to "oversee" the division of the deposit. Perhaps you could take the deposit with you in cash and go and meet the group. Do your checkout inspection and discuss any items that you want to charge for, including any rent arrears etc. Give the group half an hour to discuss and agree who will pay for what and go back expecting that they will tell you how much should be returned to each of them. You could then return the agreed amount to the person who is leaving and get a that person to sign a receipt for the cash. If you want the other two tenants to top up the deposit to the original amount perhaps you should warn them before your visit and expect them to provide the funds at that visit. If you are happy to let to them based on the 2/3rds that they had paid at the start of the original tenancy you should also tell them this and if it was agreed that more than 1/3rd was returned to the person who is leaving they will need to top it up. If they have found a new person by this time that person will simply pay their agreed share.

If the group cannot agree you may have a problem because it is not the place of the landlord to get involved and you need to tell them that if they cannot agree you have no option but to give the whole amount to the lead tenant - I would not give this person the cash but do a bank transfer so that you have a paper trail in case someone raises a deposit dispute.

Once you have sorted all this out start a new AST and a new Deposit protection with a new lead tenant of their choice.
Good luck.
Follow me on Twitter@landlordtweets

Mark Alexander

22:41 PM, 1st January 2013
About 8 years ago

Hi Mary

Presumably this sort of thing happens with students all the time? I know that's very much your market.

I think you once said there was a way for one tenant to leave and another one to come in without ending a tenancy. I can see this might be preferable to granting a new tenancy, just in case relationships break down between tenants again, especially as they are now into a statutory periodic tenancy. How does this work?

Mary Latham

2:26 AM, 3rd January 2013
About 8 years ago

Mark I do still let to students but this is now only a very small part of my business.

Any joint tenancy can be assigned so long as the landlord and all of the tenants named on the original AST agree you just need to use a Deed of Assignment. Members of NLA can download one free of charge here http://www.landlords.org.uk/services/nla-lettings-and-property-management/forms/court-forms/england-and-wales

In this particular case I would suggest that you just start from scratch because the tenants have fallen out and they need to end their "legal" relationship and begin a new one
Follow me on Twitter@landlordtweets

11:08 AM, 3rd January 2013
About 8 years ago

Apologies for the delay Carole but we have some guidance available on our website which explains the process for protecting a deposit and dealing with disputes on behalf of a joint and several tenancy agreement. However, thank you Mary in the meantime for clarifying the issue: you should indeed deal with the lead tenant.
http://www.mydeposits.co.uk/sites/default/files/images/mydep%20Joint%20%20Sev%20Tenancies%20Guide_landlordsV1_3073%20%284%29.pdf

14:21 PM, 3rd January 2013
About 8 years ago

Good advice from both Mary and Mark. Some of the uncertainty can be resolved by a meeting or a phone call. 2 meetings if the falling out is severe.

The tenants may have come up with a suitable solution. This happened in one of my student houses we did a deed of assignment and the tenancy continues to full term.

A similar scenario happened in one of our professional lets and the tenants agreed the leaving tenant received a proportion of the deposit. They found a replacement tenant themselves within the notice agreement and as they were very happy with the house they even covered the minimal costs incurred on protecting the new deposit.

Minimal input from the landlord( a bit of explanation about how the tenancy deposit system worked), and happy tenants all round.

Phil Walters.

Eastern Landlords Association and Norwich Branch Chairman.

7:36 AM, 5th January 2013
About 8 years ago

Thanks for the comments and thanks to mydeposits for their link, as I couldn't find it myself on the website. We're unable to use their Joint Tenant Transfer Form as the tenancy is no longer within the fixed term. I therefore assume I have to unprotect the deposit, issue a new contract and reprotect the deposit with a new lead tenant.

Knowing our 3 tenants I don't think it would happen, but I find it quite amazing that if I give the full deposit back to the lead tenant, and he decides not to share it correctly the other 2 tenants they end up with no protection at all!

matchmade

10:10 AM, 5th January 2013
About 8 years ago

Another solution is not to issue a Joint AST - which a lot of tenants in houseshares hate anyway because they then are liable for the rent if one of them stops paying or disappears in the night - but to have multiple ASTs with separate deposit registrations. Of course your mortgage provider may not permit multiple ASTs, and you may find the administration a pain. Also issues like cleaning of common areas at the end of each individual tenancy remain a real problem with multiple deposits because no-one wants to help the departing tenant clean the house; I've ended up putting a clause in my ASTs saying that if someone moves out, any cleaning required for the common areas is billed to everyone, so there is joint responsibility for cleaning.

Industry Observer

15:26 PM, 7th January 2013
About 8 years ago

Lead Tenant first, last and always, but also remember that the Lead tenant concept is something dreamt up by the Schemes and is mentioned nowhere in the Statute. It therefore has no support actually at Law, only in Scheme Rules (which alomst uniquely in TDP terms must be complied with to satisfy the Law) but many in our industry have just been waiting for the first Court case to test this.

The guess is that the concept will be found wanting no matter what Scheme Rules may say.

Originally it was only DPS that mentioned Lead Tenant, then the other two Schemes introduced it.

One word of advice from long experience and way before TDP came in. ALWAYS in a joint tenants scenario get confirmation of who has provided what part/%age of the deposit and annotate that on the deposit receipt, even if it seems blindingly obvious in the case of married tenants or indeed any other relationship.

And always ask if it is their own money and nort recently gien to them in connection with the tenancy.

The TDP provisions on Relevant Person apply even if the tenant pays you the money themselves. The Statute makes it clear the RP status exists if another party PROVIDE part or all of the deposit. So if Granny gives Little Johnny £500 for his deposit and he pays it to the agent or LL you still have a relevant person scenario becauseGranny has provided the money.

If it wasn't the tenant's own money originally, then it has been provided for them even if not direct by the provider to the agent/LL

Industry Observer

15:31 PM, 7th January 2013
About 8 years ago

Carole K

If you create a new tenancy and protect don't forget new PI as well especially with a new named tenant.

I know you won't but..................!!


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