Tenant demanding deposit back unfairly?

by Readers Question

12:04 PM, 3rd August 2020
About 3 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

Ian Narbeth

14:56 PM, 3rd August 2020
About 3 months ago

Reply to the comment left by Elisabeth Beckett at 03/08/2020 - 14:44
Section 6 of the Tenant Fees Act says: It is the duty of every local weights and measures authority in England to enforce in its area—
(a) section 1 (prohibitions applying to landlords).

Ron H-W

9:05 AM, 4th August 2020
About 3 months ago

That tenant looks like a "chancer":
Did he REALLY "not know about" the CCJ? - or maybe he hoped it wouldn't turn up?
* HE found the guarantor and HE request that the person be guarantor.
* If I were to be a guarantor, I'd want to read the entire document before definitively agreeing.
* WHY didn't this guarantor insist on reading the "small print" earlier?
* WHO failed to give the guarantor the full picture?
* Were you upfront about the insurance requirements?
ALL the above should have been "box ticked" BEFORE second deposit payment.
The fact that ithe payment was direct rather than through Openrent no doubt weakens tenant's case, but does not destroy it the way the group of above starred points should have done!
Sounds like somebody who reckons he can "play the system" -- I think you are well rid of him!
(Note: "IANAL" = I am not a lawyer)

Puzzler

10:44 AM, 4th August 2020
About 3 months ago

Reply to the comment left by Ian Narbeth at 03/08/2020 - 14:41
Extraordinary?? Does there not need to be an intention to be bound for a contract to be formed? Arguably if the landlord was not aware that the guarantor believed that the duration was just for the initial fixed term then the contract might not be void for unilateral mistake but I would not want to rely on it. You have much more experience than I do on this, so please elaborate. There was no need to be rude.

I agree it's not an unfair term as long as it is made clear, I have been guarantor several times for family members and the range of things asked for has varied from a note of my telephone number to a deed which required a detailed reference rom my employer and continued even after my death! In my case if they defaulted I would bail them out anyway, but I feel (legal or not) that the guarantor should be told exactly what they are committing to. Aside from anything else in the event that they are called upon, they would be more likely to pay.

Ian Narbeth

11:13 AM, 4th August 2020
About 3 months ago

Puzzler
I may have been rather terse but you posted with such certainty about a legal matter that I felt I should challenge you.

Yes, there has to be an intention to create a contract. If a friend agrees to come to my house for lunch and I arrange a fine spread but the friend fails to turn up, I can't sue for the wasted cost and expense: there was no intention to create legal relations.

If you sign a guarantee you should read it carefully first. If you don't understand it, take legal advice. A problem with the landlord or his agent "explaining" to the guarantor what the guarantee means is that they thereby may take on responsibility to give a comprehensive explanation and may later be faced with a claim that the explanation was insufficient or wrong. Ordinary commerce (including letting residential property) would become impossible if one party had to explain to the other what the contract meant.

It may be prudent to say to the tenant when sending out the AST and to the guarantor when sending out the guarantee: "Please read this document carefully. If you do not understand its terms, you should take appropriate professional advice." If the guarantor signs he should not be heard complaining later that his liability is greater than he expected.

When people sign tenancy guarantees that appear in order on the face of them, it is essential that third parties such as lenders, insurers and purchasers can rely on the documents and not have to look behind them.

Finally, the guarantor will have a right of recourse against the tenant to recover the sums paid to the landlord. If the guarantor thinks that right is worthless, that underlines the landlord's need for the guarantee.

Jan Martin

11:24 AM, 4th August 2020
About 3 months ago

Reply to the comment left by Ian Narbeth at 03/08/2020 - 14:43
I have a guarantee in place which is from NRLA
Cancellation of Guarantee
"Once the fixed term of the tenancy has come to an end if a statutory periodic tenancy or contractual continuation arises the Guarantor can cancel this agreement on giving not less than 3 months notice in writing to the landlord " "This notice can take effect at the end of the fixed term but no earlier. This means that the earliest date when notice can be given is 3 months before the end of the fixed term ." This is just part of Deed of Guarantee which I was refering to with regard to my answer.

Ian Narbeth

11:51 AM, 4th August 2020
About 3 months ago

Reply to the comment left by Jan Martin at 04/08/2020 - 11:24
Hi Jan
I have now referred to the NRLA Deed of Guarantee. It goes on to say that the Landlord can within 6 weeks of receiving the Guarantor's notice of cancellation give notice to the Tenant under s21 to extend the cancellation period for this Guarantee. The Landlord also has to start court proceedings if the Tenant fails to leave. The notice of cancellation of the guarantee in such circumstances is extended for a further three months.

That would be fair enough if you could reasonably expect to be able to get a tenant out within 4 to 6 months using s21. In the current circumstances, that is unlikely. I think the NRLA wording is too generous and do not use that for my guarantees. I am not aware of any legal requirement that the guarantor have a right of cancellation.

Jan Martin

12:33 PM, 4th August 2020
About 3 months ago

Reply to the comment left by Ian Narbeth at 04/08/2020 - 11:51
I agree with you .Far too generous .

Landlord Phil

11:14 AM, 8th August 2020
About 3 months ago

There's plenty of comment about what you can do now, but I'd like to comment about what to do in future. I had a very similar situation but insisted on taking the holding deposit via Openrent. This meant I had to do no more than state my case to Openrent & provide evidence (text message screen shots etc). Openrent made a decision & that was that. I kept the holding deposit, which was fair as I'd been misled about their personal status. The key factor is to have a 3rd party to make the decision & for that 3rd party to be the one the complainant has to take action against, thus protecting you from the need to defend yourself further. Since the fees ban, there's more chancers out there that are happy to waste landlords funds & time. This is just a small way to mitigate against some of the risks involved in entering into a tenancy agreement.

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