Rent2Rent Scheme Gone Wrong

Rent2Rent Scheme Gone Wrong

12:24 PM, 20th April 2013, About 11 years ago 70

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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.


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Tessa Shepperson

8:42 AM, 5th July 2013, About 11 years ago

Well done on your victory Marie. However if the property was let to a company, then the outcome was never in doubt as the deposit regulations do not apply to company lets, only to assured shorthold tenancies.

A let to a company cannot be an AST as s1a of the Housing Act 1988 specifically refers to property let to an individual. This excludes companies as they are not individuals ie living people but artificial persons which are created under statute.

A let to a company is therefore governed by the underlying common law. Section 21 cannot apply as this s21 is a creation of the Housing Act 1988 and can only be used for tenancies governed by that act.

A tenancy agreement to a company should therefore be one designed for that purpose and not an 'AST' which will be misleading.

I have a company let agreement as part of my Landlord Law tenancy agreement service and have done for many years.

It is very sweet of you to think of me Mark re a rent to rent pack. However I have to say that I have grave reservations about rent to rent for the reasons given by David Smith in his interview with Property Tribes at our Landlord Law conference here

Also, as you will see from that interview, a letting to a rent to rent landlord is actually a commercial and not a residential agreement and I do not deal with commercial leases.

Mark Alexander - Founder of Property118

8:43 AM, 5th July 2013, About 11 years ago

@ T Juna - Thank you for your reply. I wish I could earn £60 for every question that I answered here.

Mark Alexander - Founder of Property118

8:57 AM, 5th July 2013, About 11 years ago

Good morning again Tessa and thanks for commenting.

I also have grave reservations about the Rent2rent model and have done so since 2009 when a predecessor to the Rent2Rent business model first raised it's head under the guise sandwich lease options. See this thread and embedded video which I recorded in 2011 >>>

The problem, as I see it, is that these schemes are unlikely to be regulated in the near future and are growing in popularity by the day.

As was the case for Marie, apart from all the other risks and moral dilemma's surrounding this scheme, property owners are also being presented with the wrong types of tenancy agreements, i.e. AST's for Limited companies offering the Rent2Rent contract.

Would your Limited company tenancy agreement be more fit for purpose or would you recommend a corporate property lawyer drawing up a commercial lease?

Tessa Shepperson

9:09 AM, 5th July 2013, About 11 years ago

My company let is aimed at the situation where a company rents a property to use to accommodate is own directors or employees.

I do not have one which would be suitable for rent to rent - as David said in his interview, this is likley to be a commercial tenancy and this is not an area of work I do.

Such an agreement would need really to be drafted by a solicitor who was knowledgable in both residential and commercial leases.

I don't think it is something I would want to get involved in.

If a landlord really wants to get involved in rent to rent, there are a number of local authority schemes where the property is leased to local authority for them to sublet - hopefully the paperwork here would be more reliable.

Mark Alexander - Founder of Property118

9:13 AM, 5th July 2013, About 11 years ago

Thanks Tessa, I have invited Justin Selig from The Law Department / Landlord action to take a look at this thread as based on your confirmation this is perhaps more his field of expertise being a corporate property lawyer. Justin's member profile >>>


9:20 AM, 5th July 2013, About 11 years ago

Hi, so we still don't have an answer as to the name of the type of Lease Agreament we need if we let out to a company who want to run their business and accommodate their people in the property? Will I find it at the NLA website?

Mark Alexander - Founder of Property118

9:23 AM, 5th July 2013, About 11 years ago

@T Juna - I think we do have a name, it's a commercial lease. I very much doubt you will find one on the NLA website though.

Alan Soloman

10:42 AM, 5th July 2013, About 11 years ago

I have been reading most of the comments and would say that in my AST's I have a clause which states the tenant is liable for ALL costs / charges / fees / legal costs or whatever incurred by the landlord or his agent. A contract is a contract and once signed is enforceable in law under contract law.

Mark Alexander - Founder of Property118

11:20 AM, 5th July 2013, About 11 years ago

@Alan - you can write what you like in a contract but enforcement is another thing. A contract does not over-ride legislation. There is also unfair contracts law to consider.

Marie Smyth

12:23 PM, 5th July 2013, About 11 years ago

For Tessa. I have been involved in lettings for a long time and had never come across rent2rent before; I didn't even know that it was referred as rent2rent. This man approached the issue as a guaranteed rent and I know that this coloured my view and was a big part of my decision to rent the property to his 'Company' however I was badgered by him to proceed and under pressure from other sources I capitulated. I can understand that there isn't really a contract out there for rent2rent and maybe there shouldn't ever be one, perhaps the practice should be made illegal? After all its adding another layer to an already complicated legal minefield. Suffice to say for my part NEVER AGAIN.........

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