No tenancy agreement issued as deposit paid in installments?

Hi Cyril,

Unfortunately you have a lot of reading to do and may need professional assistance:

Some Articles from Tessa Shepperson of Landlord Law

Dealing with Deposits >> https://www.property118.com/dealing-with-deposits/

"Protecting the Deposit

When you take a deposit, you need to protect it in a scheme within 30 days of receipt of the money.

There are two possible problems areas here:

Deposits that are paid a long time before a tenancy starts, and
Situations where landlords allow tenants to pay deposits by installments.

So far as the early deposits are concerned – the best advice is to just protect them within 30 days.

Some people assume that as the tenancy has not started yet there is no AST to (as it were) hang the need to protect on. However as soon as the tenancy is created you will instantly be out of time. So best to just bite on the bullet and protect.

So far as accepting deposits by installments is concerned this is a VERY bad idea. Each and every installment must be protected within 30 days of payment and many landlords have got into trouble by waiting until all payments are paid. If you must accept installments its best to do this with the rent rather than the deposit.

What if it all goes wrong?

The problem about failing to comply with the rules is that you cannot then serve a valid section 21 notice until you are compliant – which includes refunding the money to the tenants.

If you are ever in this situation, I have prepared a Legal Kit which you can read about below, which explains the law and gives step by step guidance.

Tenants are also entitled to bring a claim for up to 3x the deposit sum if you breach the rules. So, it is best to comply so they have no chance to do this."

Tenancy Agreements and how to get them right >> https://www.property118.com/tenancy-agreements-get-right/

Are you properly protected against claims by tenants and >> https://www.property118.com/properly-protected-claims-tenants-prosecutions-authorities/

How to stop evictions going wrong >> https://www.property118.com/stop-evictions-going-wrong/

Looking at Section 21 >> https://www.property118.com/looking-section-21/

Section 21 – the New Pre-Conditions >> https://www.property118.com/section-21-new-pre-conditions/

Section 21 – time limits, forms and retaliatory >> https://www.property118.com/section-21-time-limits-forms-retaliatory-eviction/

New penalties for landlords and agents under the Housing Act >> https://www.property118.com/new-penalties-landlords-agents-housing-act-2016/

Also the Deregulation act for point of reference article by Paul Shamplina >> https://www.property118.com/what-does-the-deregulation-act-2015-mean-for-landlords/

And Our Tenant eviction page >> https://www.property118.com/evicting-tenants/

For future reference mydeposits lets you protect a deposit paid in installments upfront so you comply with the legislation.

You have rather been hoist on your own petard as you want to evict someone for wanting to leave...why did you tell him about the reference? You could just have said he was occasionally late paying which would appear to be the case and you were under no obligation to tell him what you had said.

Tread very carefully! Your tenant may make a claim against you for not protecting each instalment of his deposit within 30 days. Unless you agree a surrender then you'll need to return the deposit he has paid before (unless he'll agree for you to credit it towards the arrears in writing) and then serve a section 21 giving him two months to vacate. if he doesn't then you will need to use the standard procedure to gain possession through the courts. Hope that helps

Mmmm, i would give a reasonable reference that allows him to move on and then return all of his deposit when he requests it and absolutley above all keep him onside...The chances of him coming back with a deposit protection claim are very minimal however you don't want to poke the fire so bid him farewell wish him all the best and wave bye bye!¬

I would suggest giving the tenant the reference he requires stating that he has been making rent payments however is one month in arrears and hopefully he vacates as soon as possible.

Am I not right in thinking that as there is no tenancy agreement it could mean a non AST (i.e. licence), had it been created, so does not fall within the guidelines of having to register the security deposit?
It seems the main problem here is the fact that you didn't give a reference - give an honest reference, calculate how much rent is outstanding, give the balance of the deposit back to the 'tenant' and watch him walk into the sunset!

If the 'tenant' pays rent and has exclusive possession (i.e. landlord does not live in the property or provides services such as cleaning or food, etc) then it is a tenancy regardless of whether there is a tenancy agreement, unfortunately.

Nice One Cyril,

You are in a bit of a pickle.
I would suggest that you reconsider your position regarding the reference, because you could end up with a fine in regards to his deposit.

Also is your local authority not a licensed area yet?

Eg: in Wales both you and your property have to be licensed and have a training certificate saying you can read and write.

It’s good practice to issue tenancy agreements, carry out a Right to Rent Check and issue prescribed information in regards to deposits and the Governments How To Rent booklet.
Failure to do just the last two items prevents any No fault notice to Quit (Section 21) to be invalid.

Best of luck, but at this moment in time, try and keep it friendly.

Hi Cyril, You may have gathered by now that you've made some assumptions that have turned out not to be correct.

Firstly the assumption that just because you haven't issued a written tenancy agreement that no tenancy has been created - Yes it has, only now you have no control over its terms.

Secondly that you needn't protect the deposit because it was paid in installments and no written tenancy agreement had been signed.

Effectively once you let the tenant move in and accepted rent from him you created a legal tenancy and gave your tenant all the rights that entails. If you are paid any sum which is specified to be a deposit, or acts in the manner of a deposit it must be protected within 30 days of receipt no matter what.

Many Deposit schemes allow you to submit additional sums to the deposit, as and when you receive them. I use the DPS custodial scheme and have done this often when a tenant asks permission to get a pet and I ask for an additional amount to cover the risk of damage by the pet, I then deposit the funds and add them to the existing deposit account online.

The deposit regulations have not been complied with which means that you are unable to issue a valid section 21 notice to evict this tenant. In addition, there is a risk that the tenant (especially if you've upset him) may seek advice and find out his legal rights, (he only has to contact citizens advice or Shelter) and he has six years in which to lodge a claim against you for financial compensation.

If I were in your position, I would suggest to your tenant that the money he has paid up to now as a "deposit" be viewed as rent in advance and used against his arrears, and that if he could come up with the final £20 you could give him a glowing reference with a clear conscience making him free to go on his merry way to a new brighter future.

Certainly the best way forward for you is to do what you can to assist him to find suitable alternative accommodation. Whilst you may feel that you can't in good conscience pass him on to another landlord you've kind of painted yourself into a corner. Just comfort yourself with the fact that he hasn't been a hideous tenant and he may be a better payer if he's sharing the costs with someone else. Just try your best to wax lyrical about his good points and gloss over the less good. At the worst, if he doesn't come up with the final £20 I would still record every penny he's paid on his rent record as rent and give him a decent reference, whilst crossing my fingers that he never comes back to bite me on the butt.

If you write up the rent record to show ALL payments as rent, in the event that your tenant took you to court for not complying with the deposit regulations he would struggle to prove that there ever was a deposit. He has not got a written AST saying that a deposit was to be paid and even if you admit that you did want him to pay a deposit, but it was never forthcoming, which you can show by the allocation of the funds via your rent record. This is not likely to be challenged if the tenants rent is in arrears, or there isn't a surplus of funds which are not able to be accounted for as rent. The only hick-up I can see to this is if the tenant has written documentation showing that payments were intended to contribute towards the deposit, such as receipts or emails stating a payment was specifically towards the deposit.