Tenant signs lease then changes mind and situation turns ugly!

by Readers Question

10:57 AM, 18th August 2015
About 5 years ago

Tenant signs lease then changes mind and situation turns ugly!

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Tenant signs lease then changes mind and situation turns ugly!

I have an ugly situation on my hands here despite my many years experience in lettings.
Our new tenants (& guarantor) signed an AST last month. After they signed and returned it, a full week later I was informed that they had changed their mind. They had made a partial payment (not even close to what was due) and have been insisting they want this returned.ugly

Now, being a reasonable person I said I would not hold them to the 6 month contract but re-advertise, and then they could pay a daily rent up until a new tenant came in, which happily, happened very quickly.

Despite weeks of negotiation the previous tenant is not in agreement and insists they want all their money back and refuse to pay any rent even though they signed the contract.

They are calling the part payment their deposit. I have tonnes of email correspondence demonstrating our weeks of negotiation, as I was hoping it would all be resolved amicably. As it hasn’t been resolved I took the precaution of sending this small payment to the custodial scheme, but they’ve now realised its four days past the 30 day allocated time to register and want to take me to court.

I have said that’s fine but of course, I’ll be issuing a counterclaim for breach of contract and rent owed. Will the judge automatically make me pay them x3 of this money? I have heard judges look at cases individually and clearly this is not a black and white case!

Any feedback would be appreciated!

Jo


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Comments

15:03 PM, 18th August 2015
About 5 years ago

I persoanlly would consider it a holding deposit up until tenancy inception date. As inception date was less than 30 days ago I hope i've done the right thing by logging - even though in my eyes its not even close to a deposit.

Steve Masters

16:40 PM, 18th August 2015
About 5 years ago

At what point does the holding deposit cease to be a holding deposit, when the tenancy starts or when the tenants sign the AST?

And what dos it turn into, rent or a deposit?

17:05 PM, 18th August 2015
About 5 years ago

Reply to the comment left by "Jo stroud" at "18/08/2015 - 15:03":

Jo, if you asked for a set amount and that was to include the deposit then if it is not fully paid then there is no deposit unless the sum exceeds the first months rent.

Steve Masters

17:32 PM, 18th August 2015
About 5 years ago

Reply to the comment left by "Peter Fisher - Fixed Fee Law" at "18/08/2015 - 17:05":

Peter, that makes perfect sense, great. I assume the gov.uk "Tenancy Deposit Protection" page assumes the rent has already been paid when the tenancy starts. It could be (should be) clearer!

Jo, your ex-tenants are trying it on and are calling your bluff, stand your ground. You might not get any more money from them but you should be able to keep what you have to help cover your costs. Write to them and explain their claim is "frivolous and vexatious" and will not stand up in a court of law and if a case is started against you you will contact Legal Aid and request that their claim is rejected on the basis that it is "frivolous and vexatious". If you receive a letter from their solicitor, reply with the same.

Mike W

18:08 PM, 18th August 2015
About 5 years ago

Jo,

I am not a lawyer but I try to think logically.
By signing a contract your tenant entered into a legally binding agreement to rent your house. I understand that before they moved in they had paid you some money (rent? holding deposit? lease deposit? - what was on the bill and what did they pay?)
Also before they moved in they changed their mind. You acted reasonably and managed to find an alternative tenant.

I suspect that as the lease did not commence the money can only be considered a holding deposit - in the case of a default (which occurred).
Because of the change of mind of the tenant you would be entitled to recover your reasonable losses in terms of rent. Losses are not the minimum 6m term but the actual loss you incurred (eg rent ) up until you managed to re- rent the property out with someone else. I guess that may include other reasonable costs.
That you mistakenly lodged the money in a deposit scheme is a complication but I would argue that it was a mistake and that you are entitled to have it returned to you in full - provided it is less than your loss. You would have to argue that with the deposit scheme?.

If the amount does not cover your reasonable costs I would suggest lodging a small claim.

I would suggest summarising the facts and stating your position very clearly and requesting a further payment to cover your loss (if applicable) or returning any excess funds if they exceeded your loss. The letter would go to the tenant and guarantor.

I am not a lawyer.

Romain Garcin

20:25 PM, 18th August 2015
About 5 years ago

Regarding the payment: If the sum due included advance rent and deposit, and the prospective tenant made a payment without specifying any allocation then Jo could have decided how to allocate it.
Obviously, in the present situation it made sense to allocate it to the rent.

Now, the issue is that since Jo protected some of the money in a tenancy deposit scheme clearly at least some of the money was allocated to the deposit.
Arguably that would only be the amount protected, so if very small even the penalty would not be much.

There might also be an argument that since the prospective tenant reneged on the contract before the 30 day deadline (as I understand it) and that, in any case, no AST was ever created then the deposit protection regulations do not apply at all, even if Jo decided to protect some of the money.

I would ignore their threat at this stage.

David Griffith

21:51 PM, 18th August 2015
About 5 years ago

I am not a legally qualified but this is my understanding:-

As the "tenants" did not move in there was never a tenancy, what you had was a contract to provide a tenancy which has been broken. You are entitled to your reasonable costs for this breach i.e. re-advertising costs. loss of rent between when the "tenants" should have moved in and when your new tenants move in.

You are not automatically entitled to 6 months rent as you are required to mitigate your losses, which you seem to have done.

As far as the claim against you for none protection of the deposit there was never a tenancy (a tenancy requires that the tenants occupy the property) so the tenancy protection laws should not apply.

David Atkins

9:56 AM, 22nd August 2015
About 5 years ago

And the moral of the story is.....charge a non returnable admin fee to cover costs of reneged deals, tenant referencing, credit checks, etc. Clearly stating what the admin fee is for.

Steve Masters

13:42 PM, 22nd August 2015
About 5 years ago

Reply to the comment left by "David Atkins" at "22/08/2015 - 09:56":

This is what I do now David. I think this is fairer than increasing the rent to cover all change of tenant expenses in that it is proportionately higher for tenants who end up staying for a short time than those that stay long term.

Graham Durkin

21:17 PM, 29th August 2015
About 5 years ago

Jo, As they have signed a contract for your property they are tied,however if you offered them an opportunity to relinquish their part of the contract by signing an END OF TENANCY SURRENDER FORM providing they pay up to the date of signing this form this would give both parties an opportunity to move on,the fact they haven,t moved in is really immaterial as you then could change the locks and re-let . when they & you signed the Tenancy agreement why wasn,t the first months rent and deposit presented at the time of signing ,this would have given you a bit of breathing space before this issue arose

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