Subletting and deposit protection dilemma

Subletting and deposit protection dilemma

9:32 AM, 23rd April 2015, About 7 years ago 20

Text Size

I need some help to get my head around this subletting and deposit protection scenario please. Subletting and deposit protection dilemma

The landlord (person A) rents a flat to a tenant (person B) on an AST and protects the deposit correctly. However, the tenant then decides to move out and sublet the entire flat to another person (person C), and takes a deposit. Person B does not issue an AST but does take a deposit and does not protect it.

Is person B responsible for deposit protection or does this liability fall back on the property owner/landlord (person A)?

Is the new occupier of the property (person C) a tenant by default of person B (the original tenant)?

Can a tenant create a tenancy (in writing or by default) in a property in which he is not the owner, even if the AST between the landlord (person A) and the tenant (person B) strictly prohibits subletting?

If the property owner/landlord wants/needs to regain possession how does he go about it?

What rights does person C have? For example, does he have the rights of a ternant? Can he make a claim in respect of failure to protect his deposit and if so does he claim against person B (the tenant who he sees as the landlord) or person A, the real property owner/landlord who he may not even be aware exists?

Thanks for your help.




Mark Alexander - Founder of Property118 View Profile

9:40 AM, 23rd April 2015, About 7 years ago

Hi Sajed

I have invited some of the best legal minds I know in terms of landlord and tenant law to comment of this thread. Please look out for comments from; Tessa Shepperson of Landlord Law, Paul Shamplina of Landlord Action, Romain Garcia and Industry Observer.

Somewhere in the back of my mind I also recall something about tenants having a statutory right to sublet if 6 months rent is paid up-front, even if the AST prohibits it. Therefore, there may well be two separate sets of answers depending whether the original agreement catered for monthly payments of rent or a lump sum paid in advance.

I think I know the answers but I am not confident enough to advise.

I can see that a lot of landlords could fall foul of this issue due to amatuer Rent to Rent landlords thinking that it is OK to sublet. There are plenty of wannabes who max out their credit cards and attend courses in the beleif they can become property millionaires without having to buy a property. This phenomena is called Rent to Rent, there are right and wrong ways to go about it and the above is certainly the wrong way! I am hoping that the answers from the legal brains will confirm that both the landlord and person C will have a legitimate claim against person B.

Romain Garcin

9:48 AM, 23rd April 2015, About 7 years ago

Hi Sajed,

If B moves out and let the flat to C then that tenancy would be an AST, and thus B would take on all the responsibilities for an AST landlord, including that of protecting any deposit.

On the other hand, the tenancy between A and B would cease to be an AST.

Now, my understanding (someone please correct me on this) is that the tenancy between B and C would not be bidding on A if B had sublet in breach of his tenancy.
This means that if the tenancy between A and B were terminated then C would no longer have a right to remain, but he could go after his landlord (B) for breach of contract/tenancy.

Mark Alexander - Founder of Property118 View Profile

10:05 AM, 23rd April 2015, About 7 years ago

Reply to the comment left by "Romain Garcin" at "23/04/2015 - 09:48":

Hi Romian

That was pretty much what I was thinking too.

However, what I am struggling with is the basis upon which the landlord would obtain a possession order to get C out of the property if he doesn't leave willingly. Any thoughts?

Industry Observer

10:09 AM, 23rd April 2015, About 7 years ago

Romain (Hi Romain long time no speak) is 100% correct (I liked your ASA post on Eye this morning too Romain) C has no legal relationship with A at all and certainly A is in no way responsible for anything TDP related to C

I especially like the comment on the tenancy between A and B no longer being an AST (as B is not there as main or sole residence). Same scenario in reverse can apply in a resident landlord scenario if the Landlord moves or is carried out of the building and no longer lives there as main residence - thus converting the two tenancies on the flats upstairs from contractual to AST as the reason for the lack of AST status has been removed.

If Tessa sees this congratulations on the rating in the top 10 blogs for Landlord Law as posted on Eye today. I fully expected to see P118 there Mark and am very surprised it was not especially as your site has an edit function which enables me to amend some of my more wayward comments!!

Industry Observer

10:13 AM, 23rd April 2015, About 7 years ago


Following Romain's thoughts if it is no longer an AST then C could arguably serve a NTQ as it is a contractual tenancy, and thus just give one month's notice if it is a monthly tenancy. In effect it is a rent to rent scam but B has apparently lived there. The weakness in using a NTQ is if B reoccupies then it becomes an AST again though you could argue B has not occupied all of the property all of the time - interesting one that.

Mark Alexander - Founder of Property118 View Profile

10:20 AM, 23rd April 2015, About 7 years ago

Reply to the comment left by "Industry Observer " at "23/04/2015 - 10:09":

Thanks IO

I have never come across the Eye website so the reverse is probably true for them being aware of Property118.

I'd like to pick your brains on why you think C would be occupying the property on the basis of it not being his main and sole residence. That could be the case but equally, it may well be his main and sole residence. C may well have been lead to believe that B is the owner of the property.

I agree that C would have a claim against B and I also think A might also have a claim against B. What are your thoughts on that please?

Jason McClean - The Home Insurer View Profile

11:20 AM, 23rd April 2015, About 7 years ago

Hi Sajed

Your landlord insurance will be void if you allow subletting. Please be aware any claims will be rejected, so if the property burns down you'll be paying for the rebuild. If there is a mortgage, will the provider be happy there is no insurance?

Be careful. I simply would refuse permission for any subletting - it should say so in the AST.

Mark Alexander - Founder of Property118 View Profile

11:32 AM, 23rd April 2015, About 7 years ago

Reply to the comment left by "Jason McClean" at "23/04/2015 - 11:20":

Presumably the landlord/owner could use the legal expenses cover within his policy to fund a claim against the tenant who is illegally subletting for any uninsured damages?

Industry Observer

12:07 PM, 23rd April 2015, About 7 years ago


I said B was not occupying as his main residence (not C who is) - that is why Romain picked up on the point that as it is not the main residence of tenant B then it cannot be an AST.

On legal expenses insurance they are good but not sure they would stretch to covering an illegal situation as opposed to a straight B not paying the rent or wrecking the property? Probably does as it is any breach of the agreement of course, just a thought.

Jason the agreement will say no sub-letting - but the property has been sub-let. Point is if it is without consent then A is in no way bound by anything between B and C - if he does consent that all changes.

Dr Rosalind Beck

13:17 PM, 23rd April 2015, About 7 years ago

On the point about landlord insurance legal cover, I tried to get legal help a few years ago when a neighbour flooded our property - I didn't see why the £3,000 plus should be paid by our insurance company, with me paying the excess and my insurance premium subsequently going up. I found the legal assistance useless - they just did what I'd done and spoke to the neighbour on the 'phone and wrote to him, he denied liability (even though his liability was obvious and could be proven) and they gave up.
Maybe that was unusual; maybe they're usually better - I wouldn't know as I've only had to use them once...

1 2

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now