Rent2Rent Scheme Gone Wrong

by Readers Question

12:24 PM, 20th April 2013
About 6 years ago

Rent2Rent Scheme Gone Wrong

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Rent2Rent Scheme Gone Wrong

Rent2Rent Scheme Gone WrongI rented my property to a company who in turn sub-let the property for the same term. The tenancy was an AST in the company name and I retained a deposit that was not insured.

The company provided me via email a tenancy agreement and I introduced additional clauses to accommodate sub-letting but apart from that I accepted the agreement they provided. I met the director of the company, initially he was going to find me tenants but after only one viewing and no offers he suggested that I rent the property to his company and my rent would be guaranteed. All my dealings were with him, he said he would find tenants for my property and my rent would be guaranteed. I accepted three months copies of his company bank statements as proof of income. I was going to live abroad and hoped to rent the property for at least two years, however unforeseen circumstances brought me back to London and I gave notice requiring possession of the property at the end of the initial term of one year.

During the year several issues arose. The rent was always late. I emailed and called from abroad, it was paid but always late and on four occasions later than five days. The lease allowed for a £25 charge and interest for rent over five days late. Secondly, he reported that the oven wasn’t working and the kitchen sink was blocked and leaking. He said he would deal with it and deducted £200 from the rent. I requested an invoice on several occasions but never received anything.

On my return to London, the property was not handed back at the end of the tenancy. It was three days later that I got the property back. That morning when I attended the property I found the locks changed and the tenants still in bed with all their personal effects still in the house, food in cupboards etc. they said they were waiting for the van and the keys to their new place being provided by the company. I left to return later that day, they had just started loading a van and some three hours or so (and three days later) I eventually entered the property with a representative of the ‘company’ to deal with a checkout.

The property wasn’t clean, the fridge/freezer was frozen over, oven dirty, floors, skirting boards dirty, kitchen cupboards dirty (they just emptied the cupboards and left), bathrooms were dirty, guest cloakroom etc. Furniture was left in the wrong rooms and on different levels, the locks had been changed back which was good but windows were dirty, the back garden was reasonable but the front garden was an overgrown mess.

I wanted to deduct stoppages for the cleaning but the representative for the company didn’t agree, I had the deposit in full in cash and said we should resolve the cleaning issue now but she refused and left the property without signing the inventory out. I organised professional cleaners and two days later they attended and during their cleaning discovered the oven was not working and the sink was leaking and blocked, as they had not been repaired!! I organised an oven repair for £140 to discover the oven was beyond repair so I purchased and fitted a new oven. I organised the clearance and repair of the sink and I cleared the front garden.

Three weeks later as I hadn’t heard from the company I wrote sending copy invoices and deducted the cleaning costs, the cost of unblocking the sink but not the repair.  I deducted £200 for the repairs I had been charged for but had not been done, I deducted £25 for each late payment, the initial checkout fee and a fee for returning later that day to deal with the inventory checkout again and finally I deducted two days additional rent for vacating late. All these are covered within the terms of the agreement bar £200 deducted from my rent for repairs not done, however without an invoice. I have proof the works were not done this was justified. I sent a cheque for approx £400 left from the deposit following the deductions and requested to meet and discuss if the company had any queries etc. The cheque was cashed and about six weeks later I received a letter saying they would take me to court for not insuring the deposit and that I should pay them all the deposit back. I refused, again suggesting we meet and received a letter demanding £500 back on top of the £400 already paid or he would take me to court!! I wrote again and said I was happy to meet to resolve the matter because I could not see how the company was coming to their figures? I finally received a letter stating they do not have time for this but would take me to court and I would have to pay four times the deposit in compensation.

That’s exactly where we are. They applied to the small claims court, I have appealed and am now waiting for a court date.

I believe the tenancy should have been a company let? That it does not require the deposit to be insured and therefore the only question is the cost of legitimate costs for damages, cleaning etc from the deposit. However I know the Judge will decide the type of tenancy but I’m wondering if there is any other case I can rely on to support my case?

I felt I had to follow through with this issue as the ‘company’ can claim 3 times the deposit up to six years after the termination of the tenancy even if I handed back the full deposit. I believed I did everything right but was guided by this man who operates an agency sub-letting properties for owners living abroad. The claim to the court was filed in the man’s name not the company name as stated on the tenancy agreement. My question is if a property is let to a named company, even if the tenancy states it is an AST, is it a company let?

Do you know of any similar case where the ruling had fallen in favour of the defendant in respect of an AST being a company let and falling outside the deposit protection scheme?

Any help would be gratefully appreciated.

Marie



Comments

Mark Alexander

12:36 PM, 20th April 2013
About 6 years ago

Marie, I hate to tell you this but I think you have been stitched up by an inspired operator of a scheme known as Rent2Rent. People are paying thousands to learn how to operate these schemes, they are the latest "Get Rich Quick" scheme in the underworld of the GRQ market targeting wannabee property investors. Please see this thread >>> http://www.property118.com/index.php/guaranteed-rent-a-warning-for-landlords/37513/

It will be interesting to see what the judge says but I would recommend you to try to settle out of court, unless of course you want to take the risk of losing the case as a way to warn other landlords of this scam.

The judge will no doubt ask why you used an AST knowing that the deal was a company let. You say the claim was in the name of an individual and so was the AST so I think a judge might well just dismiss the Company Let claim and award against you.

Even if the judge accepts that your tenancy was a company let he may well still award against you on the basis that you knew this yet still used an AST and failed to protect the deposit. The judge will undoubtedly ask why you made amendments to the AST if you knew it was the wrong document. I suspect that some of the clauses you entered will not be legal either and no doubt others will comment on this too.

All in all Marie, my prognosis for your situation from what I have read isn't good.

Sorry to be the bearer of bad news.

What I would say though is that you could have had things much worse. Rent a few days late every month and less than a thousand pounds worse of damage isn't that bad under the circumstances. Your tenants could have caused 10's of thousands of pounds of damage to your property, never paid a penny in rent and then refused to leave.

If I were you I would consider this to be a relatively inexpensive learning process in the grand scheme of things.

Moral of the story is use a properly qualified letting agent in future. You could have had everything done properly for you for less that £35 a month. Please see >>> http://www.property118.com/index.php/find-me-a-tenant/

Mary Latham

13:00 PM, 20th April 2013
About 6 years ago

This is covered in Housing Act 1985 Section 81

Case law on this Shephers Bush Housing Association V HATS Co-Operative of Hammersmith Ltd 1992. Islington LBS v Green 2005 & 2006

In your case your contract with the company is not an AST because they are not an "individual". The law cannot be changed by the terms of the contract and Tenancy Deposit Protection only applies to tenants who are individuals not companies or as in one of the cases above Housing Asscociations. Perhaps if you make them aware of the law they will back off if not go into court armed with a copy of the legislation above

Good luck

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Mark Alexander

13:27 PM, 20th April 2013
About 6 years ago

Following Mary's post I concede that in some of my comments above I might well have been wrong in this instance.

Good luck Marie and please let us know what you decide to do and how you get on.

Marie Smyth

16:57 PM, 20th April 2013
About 6 years ago

Mary and Mark

Thank you so much for your comments, The contract was in the company name so I'm holding out all the way and taking this to court. I feel very strongly that I must fight this, I'm sure this guy will have done this in the past and will continue even if he he doesn't win against me (fingers crossed). I wonder does anyone know if I could find out if he has made successful small claims previously? I've tried to find out but without any success. I requested further information via the court from him I.e a copy of the contract between him and his tenants but haven't received any response. I've also discovered that the electricity, gas, council tax etc was never changed from his company into the sub-tenants names and finally this chap has now stood down as director of the company and a new person has taken his place. It might be that they won't proceed in light that I've received no further paperwork only that of the court hearing date. I'm assuming that he must also provide documents to me prior to the court date but we are sometime away from that. I will use the case law you have mentioned Mary, it's just what I've been looking for - a big thank you.

Mary Latham

18:49 PM, 20th April 2013
About 6 years ago

You are very welcome Marie. I would be very interested to know how you get on please post to tell us.

He may well have stood down as a Director but the contract is in the company name and if he signed it he did do on behalf of the company.

In law there is NO requirement to have a written contract to let a property and therefore the Judge must base his findings on the facts of the occupancy not the contract. Take evidence that the utilities were in the name of the company too this will all help.

I hope that anyone who is considering entering into a Rent to Rent contract on either side is reading this.

Follow me on Twitter@landlordtweets.

21:04 PM, 20th April 2013
About 6 years ago

Hi Marie, Mark and Mary.
As an investor I take on the occasional Rent2Rent when offered me by agents as I find it a good addition to cashflow. I take these in a company name and use the fact that the deposit doesn't have to be registered as part of the pitch to the landlord. So Mary has very good advice here.

Mary, I wonder if you know of any precedent to give light on something that has been a question for me as a worst case?
If a guaranteed rent agent does not (for what ever reason) give the property back vacant, but instead with paying tenants in place, or non paying tenants in place. I am wondering what the legal position might be.

I do not mean to hijack the post, but thought it relevant enough to include in the same section as it is a Rent2Rent nightmare.

Marie, I agree with Mark that you have a lucky escape here. Unscrupulous tenants, agents, companies could have left the situation a whole lot worse. It sounds like these are trying it on, but they might have been evil and that can cost tens of thousands as many poor landlords will testify.

I wish you every good luck with this.

Ed

Marie Smyth

22:23 PM, 20th April 2013
About 6 years ago

Ed, your not hijacking anything, the more comments and thoughts the better and I appreciate all of them. I've been in lettings for many years and your question was forefront on my mind so I added clauses whereby the company would be responsible for all costs if possession was required for non payment of rent or breach of tenancy by the sub-let tenants. Having said that I'm glad I added the clauses as it proves in the contract that the company intended to sub-let the house, had I not I think I would be facing further difficulties in court. It just goes to show, even with my experience we can all fall foul of unscrupulous people. In mitigation, I had to leave London in a huge hurry to look after a sick relative (mom) and when emotional pressure supersedes your natural thought processes mistakes are made. Also I've always been very honest and straight with tenants and I expected the same professionalism from another 'Landlord/agent' ? Big, Big mistake. I know I was very lucky they moved and yes it could have been a lot worse but I refuse to go down without having my say on the matter or just rolling over and letting this 'Company' get away with it. The new rules on deposits although onerous were necessary to 'catch' bad landlords however for the honest ones out there it has added hugh additional amounts of paperwork whereby if you register a deposit late tenants can claim 3 x their deposit up to six years after the end of the tenancy. I think the rules are crazy and will open the flood gates for unscrupulous tenants also; as for having to insure the deposit again following an extension/renewal/rent increase I personally think that is a step too far.

Mary Latham

23:48 PM, 20th April 2013
About 6 years ago

Ed if the property is not returned with vacant Possession rent is still due. I am assuming that your contract says that it will be retuned with vacant Possession?

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Marie Smyth

13:54 PM, 24th April 2013
About 6 years ago

Mary

Im having trouble finding the case law you refer to: Case law on this Shephers Bush Housing Association V HATS Co-Operative of Hammersmith Ltd 1992. Islington LBS v Green 2005 & 2006. I wonder could you direct me to where I can read about this on the net?

I've also just received a letter from the Court that the claimant as applied to have the case name changed from the individual to the company and has increase their claim. They are looking for approx £5,000 now!!! My situation is dire, I have not had an income in over 18 months and am the sole carer for my son at the moment. I called the Court to see about Legal Aid but its unavailable for this type of case. Can you direct me to free legal assistance? Its a big ask but your help would be appreciated. It just feels like the icing on the cake of a very stressful time especially as this the last thing I need right now. Thanks M

20:24 PM, 24th April 2013
About 6 years ago

Hi Marie
Sorry to hear about your situation. They've have behaved appallingly. I hope things turn out OK.
Mary's advice seems pretty definitive so the claimant changing the amount etc (complete chancers) - shouldn't really matter? although granted i am sure it was a big shock!!! 🙁
Regards
Arlo

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