Tenant demanding deposit back unfairly?

by Readers Question

12:04 PM, 3rd August 2020
About 2 months ago

Tenant demanding deposit back unfairly?

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Tenant demanding deposit back unfairly?

We have a prospective tenant that failed the referencing due to a CCJ they apparently didn’t know about (we refunded their holding deposit). We liked them and tried to work with them and offer an olive branch through them finding a suitable guarantor.

They accepted and found someone suitable and paid the holding deposit again (through bank transfer). We held the property an extra week after the referencing passed for them to move in on a more convenient date. Then, the night before they were due to move in the guarantor changed their mind and pulled out when viewing our guarantee agreement which states it’s for the full term of the tenancy and not just 6 months only (which we assumed they would’ve known).

They subsequently told us this and pulled out on the morning they were due to move in! Now they are demanding their full deposit money back and stating it was our fault, because of our strict insurance which required a guarantor.

We are almost certain this is unfair on us as we now incur additional costs for the property for several weeks whilst we find a new tenant.

However, now they are saying they will raise a dispute through OpenRent (even though the deposit was never taken through this website and it was paid direct to our bank)

Do we have to give their money back?

Are we breaking the law by not returning it or can we be taken to court like I believe they will threaten?

Many thanks

Pete

 


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Comments

psquared

12:44 PM, 3rd August 2020
About 2 months ago

I think this is a lesson to be learnt. When i ask for a holding deposit i sent an email explaining all the circumstances that their holding deposit could be forefit. I then ask them to email to confirm they have read the email about why they may loose the holding deposit and that they have been given the opportunity to obtain further advice and that they wish to proceed and have understood that anything that any adverse information that show up during the reference and was not declared before applying may lead to their application being declined and the deposit forfeited.

So in your case there is a slight argument that you didn’t clearly explain the full conditions.

This is not legal advice just what my instincts suggest... i would offer them50% if the deposit back as long as they Sign to say that this is in full and final settlement of the matter of the holding deposit and that they have been advised that they can seek professional support if they are unsure if their rights.

I think they are highly likely to accept and if they go for legal advice who is going to bother to take the case on for £100 or so

Hope that is helpful

Ian Narbeth

12:49 PM, 3rd August 2020
About 2 months ago

Hi Pete
In a sensible world you would retain the holding deposit because the tenant has failed to complete the tenancy with the guarantor. It is not unreasonable to expect the guarantor to cover the full duration of the tenancy.

Unfortunately, the Tenant Fees Act 2019 means that if the Council determines you should have refunded any part of the holding deposit, you are ipso facto guilty of taking a "prohibited payment" and could be fined up to £5000. In the circumstances you describe, you will not be fined that amount. However, there is little upside for you. If the tenant reports you to the Council and they take the case on you will have to spend time to defend your professional reputation. If you win, you can keep the holding deposit. If you lose you are in trouble. There is no risk to the tenant.

If you decide to tough it out I suggest you write to the tenant explaining that your guarantee is standard and that unless your tenant defaults the guarantor will have nothing to worry about. Good luck.

Lindsay Keith

12:55 PM, 3rd August 2020
About 2 months ago

Pay them the money to be rid of them and avoid avoidable hassle that will cost you more than the dispute is worth? Write it off to experience?

Puzzler

13:05 PM, 3rd August 2020
About 2 months ago

Quite a lot of guarantors don't realise what is involved, some think it is just a character reference. You cannot rely on them knowing - it is a contract and both sides need to know exactly what they are binding themselves to, otherwise it is invalid anyway, and it was beholden on you or your representative to explain that.

For one week's rent, I would just give it back and put it down to experience.

Jan Martin

13:29 PM, 3rd August 2020
About 2 months ago

I would pay them off. Most people do know they have a CCJ and judging by the start of this tenancy it doesnt look good .I dont know which guarantor paper work you are using but the terms have to be fair and guarantors need to have chance to opt out after initial term .

Mike T

13:43 PM, 3rd August 2020
About 2 months ago

Hi Pete, You say that you liked them - presumably they also like you both. Now they are saying their guarantor don't like being tied for the length of the tenancy.
I can understand it's a bit unsettling to have them demand the deposit back but, as others have suggested, put it down to experience and just think ' they would have been trouble further down the line anyway so your best off without them'.

psquared

13:48 PM, 3rd August 2020
About 2 months ago

Reply to the comment left by Jan Martin at 03/08/2020 - 13:29
Can someone please clarify. It is my understanding that as long as you advise a potential guarantor to seek legal advice and clearly explain that they will be liable for any payments not made by the tenant then the guarantee is good for the entire tenancy even if it goes to a statutory periodic. There is no requirement to give the guarantor an opt out option.... anyone advise please

Ian Narbeth

14:41 PM, 3rd August 2020
About 2 months ago

Reply to the comment left by Puzzler at 03/08/2020 - 13:05
"..both sides need to know exactly what they are binding themselves to, otherwise it is invalid anyway...". Please provide authority for this extraordinary statement.

Ian Narbeth

14:43 PM, 3rd August 2020
About 2 months ago

Reply to the comment left by Jan Martin at 03/08/2020 - 13:29
"... but the terms have to be fair and guarantors need to have chance to opt out after initial term". I disagree with the second part. The terms are that the guarantor guarantees for so long as the tenant is the tenant. What is unfair about that?

Especially now that it is hard to evict defaulting tenants it would be unfair to the landlord if the guarantor's liability did not continue after the initial period.

Elisabeth Beckett

14:44 PM, 3rd August 2020
About 2 months ago

Reply to the comment left by Ian Narbeth at 03/08/2020 - 12:49
What’s it got to do other the council?

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