Rent2Rent Scheme Gone Wrong

by Readers Question

12:24 PM, 20th April 2013
About 8 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

Industry Observer

20:37 PM, 24th April 2013
About 8 years ago

Think you may be mixing your metaphors here Marie and this is the last straw, not the icing on the cake.

Apologies for delayed comment Mark did flag this up to me late last week but have been out of circulation.

Right

I agree with Mary in almost every respect here, the only one I doubt is her comment about the Court looking at occupancy and not contract but she must have sound basis for saying this as her advice is always practical and well founded.

If you have a Company Let then you have a Company Let, first last and always.

On that basis I just fail to see where any legal argument can lie with the company as clearly as Mary says the deposit did not need to be registered. It was a company let and so outside the TDP provisions so no claim can be raised in that respect.

Quite how the company can even attempt to claim back the balance of the deposit defeats me, and how they can possibly claim £5000 - where is there loss? My guess is it is all a big bluffand that on the hearing date they won't show.

I have seen their approach countless times as the best form of defence is attack approach. So when faced with a legitimate claim these rogues claim ludicrous amounts designed to frighten you off. You have to decide whether to be frightened off, but I'd be amending your defence counterclaim too and claiming for far more and I assume rent arrears as it sounds like a miracle if all the rent was ever paid to you.

If you have the weight of evidence that you say then counterclaim hard and show these people for what they undoubtedly are - rogues, crooks and charlatans.

One final point you ask for legal help but in the Small Claims Court often this is not allowed and you need to clarify with the Clerk to the Court. Otherwise you need a no win no fee firm and their attitude will tell you whether your case is as strong as you think, and the company's as weak.

21:45 PM, 24th April 2013
About 8 years ago

There is no doubt that these 'investors' are indeed Rogues, Crooks and Charlatans, but to refer to R2R as the next 'Get Rich Quick Scheme' targeting wannabee property investors, or indeed as a 'Scam', is wholly inaccurate!

R2R is a strategy that has been around for many many years, used by professional investors. With finance so hard to come by and rooms in such high demand it's no surprise that R2R has come bubbling up to the surface.

Like every other industry on the planet there are those who operate with integrity and those that do not.
In this particular case there were mistakes made on both sides, a difficult exit from the deal seemed inevitable.
I know of many investors, including myself, who run R2R alongside other strategies very successfully and will continue to do so.

I actually invite LL's to inspect properties or issue reports if they are unable. This week I had a first visit in 2 years from a LL who commented 'The property is in better condition than when I left it'. We have NEVER been late on a payment. We have all insurances and warranties in place. We create a safe home for our tenants.

I also run a R2rR course - the Multi Let Cashflow System, we don't charge thousands we charge £497. When you balance this against the profit we make from 'our' properties - between £600 and £1k, it is a fair cost.
I won't become a millionaire from R2R (?) but it is serving me very well as it is a multitude of other investors.

Don't be shocked or put off by the occasional bad press and sensational reports of R2R being evil and wanting to eat your children!! :-O

Marie Smyth

23:51 PM, 24th April 2013
About 8 years ago

Dear Industry Observer

Metaphor mix up because I'm brain addled with too much on my plate!!! Thanks to everyone for commenting here, I appreciate the support. Just a footnote; the contract signed was an AST; the tenant a company who in turn sub-sublet the house. The company 'tenant' supplied the agreement and I amended to accommodate sub-letting otherwise I would have little proof. I have proof the gas and elec were in the company name and am trying to see if the Council Tax was changed to the sub-let tenants names? I don't know how I can counter claim for anything, I deducted funds from the deposit, I have proof for those deductions and I am assuming the Judge will decide if I stopped funds from the deposit ligitimately? I did request that the claimant provide a copy of his contract with the sub-tenant as this would accommodate any deposit deduction he would be able to recover from them but he hasn't entered into any correspondence, statement nor has he provided the contract?

Industry Observer

13:04 PM, 25th April 2013
About 8 years ago

Marie I think your last couple of sentences say it all, this tenant should also be asked for all these documents in Court, and to show whether a deposit was paid by the sub-tenants and if so whether it was protected as my guess is they will be on some form odf AST, probably the sharers version (AST on own room/licence on common parts).

How you counterclaim for anything else is damages for the distress caused to you.

If it is an AST but with a company named tenant and signing as such then there can be no question of TDP and thus you cannot possibly have committed an offence.

Joe Bloggs

19:44 PM, 25th April 2013
About 8 years ago

out of interest must the company be a plc or ltd to qualify as a company let? or could a 'company' be just individual/s trading under a company name?

Marie Smyth

19:58 PM, 25th April 2013
About 8 years ago

Even if the company is a single individual trading as a company (he/she would have to register with Companies House and provide yearly audited accounts) a person cannot just call themselves a company without adhering to regulations. Therefore if its an individual company of one and a named secretary, a company with 2+ directors or Plc it would still be a company let. Anyway, that would be my understanding of the position.

Joe Bloggs

20:03 PM, 25th April 2013
About 8 years ago

hi marie
pretty sure thats not correct. companies house is not for sole traders or unlimited partnerships etc. however, if you are self employed you do need to notify hmrc and tell them the name (i.e. company name) you are trading under.

Marie Smyth

20:14 PM, 25th April 2013
About 8 years ago

Thanks Industry Observer for your comments. I certainly hope the Judge sees it that way? If they don't provide any requested paperwork and are seen to be uncooperative then hopefully the Judge will take a dim view. In all correspondence, prior to the court action I have requested to meet to discuss the discrepancies (if any, which I believe we're all legitimate deductions), providing contact numbers etc and on each occasion I was challenged with Court. I agreed to mediation but heard nothing further. One of the reasons of regulating deposits was to reduce pressure on the Courts; so I do think that this should be a consideration where there is a definite lack of consultation or endeavour to resolve the situation? Had this 'Company' met me then all this would not have been necessary however I think if I had returned all the deposit (cut my losses and just let them get away with it) I think they would still be bringing this action? Perhaps they do it to all their LL's, provide the wrong agreement, take LL to court in fact it might form a large part of their revenue?

Industry Observer

20:18 PM, 25th April 2013
About 8 years ago

To sign a Company Let, or more correctly a letting to a Company, it must be a Plc, a private or public limited company

Marie Smyth

20:43 PM, 25th April 2013
About 8 years ago

For Joe Bloggs. I am referring to Ltd and Plc not individuals running a business with a company type name. Industry Observer said it better than I , apologies if I did not make myself clear. Suffice to say, I signed an agreement with a Ltd company, referenced the company not the person etc.

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