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Big mistake-forgot to register a tenant's deposit-HELP! URGENT!

Started by Nurlana, May 09, 2019, 04:08:57 PM

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Nurlana

Hi. I have a slightly complicated issue to discuss and would like the best possible advice please. I am a private landlord and realised after my tenants moved out and asked for their protection details that I failed to register their deposit. You can judge me if you want, but genuine human error. I have rented out previously and registered immediately, i have proof that their money was never used. Throughout the whole tenancy and up until now we have been friendly/professional relationship.

Tenants caused damages to some furniture items (there was an inventory report), the flat had a lot of cleaning issues to be addressed, a lot of repair works to be done. Throughout the whole process, i was amicable with them. They didn't agree to pay the full amount and offered 600. When I agreed because I wanted to be over with this, they offered a new price of 400 in writing. They have also made some ridiculous justifications suggesting me to do the repair work myself and replacing items for much cheaper alternatives. I let go of all of this. But now I understand because I failed to register their deposit, i am not in a good situation even if they agreed to pay £400 in writing. They are asking for their deposit registration details. What should I do? Are there any ways to recover 600 or 400 they agreed to pay? Is it too risky to deduct it from their deposit considering my failure to register it? One of the tenants is studying to be a lawyer unfortunately for me. Any advice on how I can deal with this issue?

Martha

Quote from: Nurlana on May 09, 2019, 04:08:57 PM
Hi. I have a slightly complicated issue to discuss and would like the best possible advice please. I am a private landlord and realised after my tenants moved out and asked for their protection details that I failed to register their deposit. You can judge me if you want, but genuine human error. I have rented out previously and registered immediately, i have proof that their money was never used. Throughout the whole tenancy and up until now we have been friendly/professional relationship.

Tenants caused damages to some furniture items (there was an inventory report), the flat had a lot of cleaning issues to be addressed, a lot of repair works to be done. Throughout the whole process, i was amicable with them. They didn't agree to pay the full amount and offered 600. When I agreed because I wanted to be over with this, they offered a new price of 400 in writing. They have also made some ridiculous justifications suggesting me to do the repair work myself and replacing items for much cheaper alternatives. I let go of all of this. But now I understand because I failed to register their deposit, i am not in a good situation even if they agreed to pay £400 in writing. They are asking for their deposit registration details. What should I do? Are there any ways to recover 600 or 400 they agreed to pay? Is it too risky to deduct it from their deposit considering my failure to register it? One of the tenants is studying to be a lawyer unfortunately for me. Any advice on how I can deal with this issue?

You could take the £600 out of the deposit if that is what you have agreed.   However the big fat elephant in the room is the fact that the tenants can chase you for 1-3 times the value of the original deposit.  Note this is not 0-3 times.  You will pay at least 1x if they take it to court.  Best consider a rearguard action to settle in between.   Your £600 may or may not be a bargaining chip.

Nurlana

I know about the implications. I have ofcourse considered giving back their deposit in full. Just not sure how to approach this...talk, come clean and be open. or just send a short email saying i couldnt find their details and sending their full deposit back. AND hope it ends there...

Martha

Quote from: Nurlana on May 09, 2019, 04:42:47 PM
I know about the implications. I have ofcourse considered giving back their deposit in full. Just not sure how to approach this...talk, come clean and be open. or just send a short email saying i couldnt find their details and sending their full deposit back. AND hope it ends there...

I think it is an interesting question, because IIRC they have 7 years in which to bring the action,

Nurlana

Do they get compensated if I am taken to court? or do I have to pay penalty for failure to register the deposit? Why would they be so motivated to sue me if I paid them back in full?

heavykarma

It  is an automatic penalty,a fine of sorts,which is given to the tenant.I suspect they already know the deposit is not protected,so I doubt if trying to fob them off will work.Given the state of the house,and your past clean record you would probably only be told to pay 1x deposit.Always worth negotiating.

Nurlana

Quote from: heavykarma on May 09, 2019, 05:22:29 PM
It  is an automatic penalty,a fine of sorts,which is given to the tenant.I suspect they already know the deposit is not protected,so I doubt if trying to fob them off will work.Given the state of the house,and your past clean record you would probably only be told to pay 1x deposit.Always worth negotiating.

I see..Thanks for your reply. I have a feeling they already know as well. as i have been asked twice for their deposit details. I see 3 options.

1)f I return their deposit with a note saying that I return it in full as I couldnt find their details.
2) I meet them, talk to them, explain that i made a mistake, apologise about this. Give them back their money full letting go the damages they admitted to pay for
3) I take out 400 they agreed on in writing (600 was verbal) and give back the rest. Talk to them explaining why I did it. If they ask for compensation, return back the rest of their money.


What would you do?


Nurlana

Quote from: Mortimer on May 09, 2019, 06:06:00 PM
2.

Ok. now they emailed me and said they suspect their deposit wasn't protected. They didn't wait for my reply. I tried to call to arrange a meeting. No answers....

Nurlana


Hippogriff

They suspect their Deposit wasn't protected. It is a fact their Deposit wasn't protected. You are liable for a penalty between 1x and 3x the Deposit amount - what was it in £s? How long were they there for, and how many separate tenancies? 1 or more?

If they bring a case you have no defence. There are no extenuating circumstances or justification. You will lose and be forced to pay them a penalty.

It seems everyone is on the same page.

Advice from this forum would usually be to settle before it reaches Court, but you have not yet received notice of anything - like a Letter Before Action.

Maybe they will do this themselves. Maybe they will engage a no-win-no-fee Solicitor. Maybe they will do nothing (unlikely, they have some free money coming to them).

You could either be proactive or reactive.

I'd probably be tempted to be reactive... see what happens next. Hopefully it's a Letter Before Action directly received from them, inviting you to deal. But it may not be... it may be a letterheaded letter you receive.

Hippogriff

Your 3) appears to misunderstand the situation regarding compensation / penalty. I don't know if my assumption is correct, but it reads like you don't fully understand your exposure.

Nurlana

Quote from: Hippogriff on May 09, 2019, 08:18:57 PM
They suspect their Deposit wasn't protected. It is a fact their Deposit wasn't protected. You are liable for a penalty between 1x and 3x the Deposit amount - what was it in £s? How long were they there for, and how many separate tenancies? 1 or more?

If they bring a case you have no defence. There are no extenuating circumstances or justification. You will lose and be forced to pay them a penalty.

It seems everyone is on the same page.

Advice from this forum would usually be to settle before it reaches Court, but you have not yet received notice of anything - like a Letter Before Action.

Maybe they will do this themselves. Maybe they will engage a no-win-no-fee Solicitor. Maybe they will do nothing (unlikely, they have some free money coming to them).

You could either be proactive or reactive.

I'd probably be tempted to be reactive... see what happens next. Hopefully it's a Letter Before Action directly received from them, inviting you to deal. But it may not be... it may have a letterheaded letter you receive.

I understand I made a draconian mistake and understand there are consequences. Isnt Letter Before Action a must? They actually responded back to me and thanked me for sending their deposit back. Also willing to meet ...

Nurlana

Quote from: Hippogriff on May 09, 2019, 08:23:52 PM
Your 3) appears to misunderstand the situation regarding compensation / penalty. I don't know if my assumption is correct, but it reads like you don't fully understand your exposure.

I chose 1 and 2 in the end! Sent an email. paid full deposit back. Had a semi-positive thank you email. I think they are ok to meet and we will meet tomorrow and I should probably explain myself somehow and apologise, but dont overdo it...and hope for the best...

Hippogriff

Are you prepared, mentally, to make an offer that brings this to a close... if it comes up? If so, what is that offer? 1x? 2x? <1x?

The idiom "a bird in the hand" often applies to these situations.

heavykarma

Don't have this hanging over you for 7 years.They sound open to an offer, so don't waste this opportunity.I doubt if they will just go away without being paid something,no matter how civil they are.

Simon Pambin

I think it's pretty clear that your former tenants know that you didn't protect the deposit and know how much they're potentially entitled to, and know how long they've got to make a claim. Be ready to make a reasonably generous offer - e.g. provide a good reference, forget the damages, and then a lump sum to  top it up to just north of 1x the deposit. Make it easy for them to accept.

If they agree, be sure to get them to sign something to the effect that they're receiving the money in full and final settlement of any claim in respect of your failure to protect the deposit and issue the prescribed information. They get a pay day, you get to sleep at night, everyone's happy.

Nurlana

Quote from: Simon Pambin on May 10, 2019, 10:16:20 AM
I think it's pretty clear that your former tenants know that you didn't protect the deposit and know how much they're potentially entitled to, and know how long they've got to make a claim. Be ready to make a reasonably generous offer - e.g. provide a good reference, forget the damages, and then a lump sum to  top it up to just north of 1x the deposit. Make it easy for them to accept.

If they agree, be sure to get them to sign something to the effect that they're receiving the money in full and final settlement of any claim in respect of your failure to protect the deposit and issue the prescribed information. They get a pay day, you get to sleep at night, everyone's happy.

I understand this might happen, and accept the consequences for my mistake. Good lesson for future. I am not greedy and have returned the deposit in full and ofcourse let go of all the damages and the sum they were prepared to pay me to compensate for the damages. I am meeting one of them today and I chose to explain myself. And hope they understand, because throughout their tenancy, i have been good, understanding, always responsive to all the queries. I hope they arent greedy and will be happy with the fact that despite damages they got all of their money back...why always assume the worst in people? :) they might be understanding and let this mistake go.

Mortimer


Hippogriff

Quote from: Nurlana on May 10, 2019, 12:20:28 PMI hope they arent greedy and will be happy with the fact that despite damages they got all of their money back...why always assume the worst in people? :) they might be understanding and let this mistake go.

If you've returned the Deposit in full, what - in your view - would even be the point of having a meeting with you from their side? I think it's predictable what will happen - however, I am sitting here, fingers-crossed, that this notion actually comes to fruition.

I am not a pessimist, I am a realist. You are now entirely on the back-foot in these discussions. Good luck.

Nurlana

Quote from: Hippogriff on May 10, 2019, 01:46:45 PM
Quote from: Nurlana on May 10, 2019, 12:20:28 PMI hope they arent greedy and will be happy with the fact that despite damages they got all of their money back...why always assume the worst in people? :) they might be understanding and let this mistake go.

If you've returned the Deposit in full, what - in your view - would even be the point of having a meeting with you from their side? I think it's predictable what will happen - however, I am sitting here, fingers-crossed, that this notion actually comes to fruition.

I am not a pessimist, I am a realist. You are now entirely on the back-foot in these discussions. Good luck.

Sorry, didnt explain myself properly. It was my idea to have a meeting. I sent the deposit back in full yesterday and now want to explain the situation in person....

Hippogriff

I still cannot assess whether you understand the situation. You can explain everything, they can sympathise with you and (verbally) tell you they don't intend to do anything and promise you that they consider the matter closed... you return home, thinking that you've slayed it, and a LBA arrives on your doorstep anytime in the next several years... to consider the matter closed, properly, you'll need something signing. Otherwise, as others have implied, you'll surely have this been hanging over you. I'm saying to you... I cannot see the point of them agreeing to be at a meeting with you unless they expect to get something from that meeting... it's of no value to them to have you explain your oversight. Bluntly... why do they care?

heavykarma

I hate to sound like an old cynic,but tenants who leave a dirty damaged house behind them have not necessarily got the same mindset as you or I.You may feel that the fact you have been a helpful and obliging landlord should count for something.They probably won't care about that,nor, it has to be said,do the courts if it comes down to it. Simon Pambin's advice would be your best option.Good Luck.

Martha

I think you should consider ring fencing 2 or 3 times the deposit, in an account somewhere, ready for when they come knocking in 5 years.

MitchofOz

Hi,
I'm facing a similar issue but in my situation I returned the deposit after the tenant left he was in my home for 4 years.
It was only in the 4th year I placed his deposit into a TDP scheme as for the first 3 years I had completely forgotten.

The tenant came back to me claiming a deposit time 3 time 3 years for the sum of 18k pounds
I replied back and said i'll settle for a lower sum say 450 pounds.

This lawyer then sends me a part 36 offer for the sum of 6k. How does this work because I am reading that I am liable for interest and costs if its goes to court even if the tenant receives less than the 6k Part 36 offer. Or the tenant is liable to my costs.  This is so trick to understand. Then there is something in the letter about 10% interest charge and 10% awarded above if tenant wins on their settlement claim.

My advise if I were you forget the damage give back the deposit and ensure these tenants don't become nasty and chase you as mine have to failing to protect their deposit. Failing to protect a deposit I am seeing and hearing from landlords more and more tenants are trying to win a quick buck on genuine error that was made by a every decent landlord.


This is despite me being a good landlord and not increasing this tenants rent to market rate has he had a young family and never really complained to me and the rent was always paid on time.  Amazing how they become a shark when they become aware they can make money for nothing because of an error I had made same as you).

Hippogriff

1) Forget about interest calculations and every other small thing... all that matters is what you can settle for, hopefully it is a figure that is somewhere between the £450 and £18,000 mentioned... compromise often means that neither party involved (except perhaps the Solicitor) is going to leave happy.

2) Decent and good Landlords don't make genuine errors in protecting Deposits, sorry... at best you were ignorant / incompetent / lazy / lackadaisical, i.e. not "good" by any stretch.

3) The Tenants who have been wronged are doing nothing wrong by seeking redress from Landlords who have done something wrong... it hurts if you're on the receiving-end, of course it does, but the Landlord isn't the wronged party. Whether the penalty is proportional is entirely another question.... but I suppose there has to be a scale of invidiousness.

KTC

3 times 3 years at £18,000 meaning there were 3 tenancies with a deposit of £2,000? If that's the case, then £6,000 is 1x for all 3 tenancies, the minimum penalty. If so, accept it, quick, like right now, before they incurred any more cost. If my assumptions about the number of tenancies and deposit amount was correct, there's no way you can beat the offer at trial, you are guaranteed to pay at least as much in penalty, plus higher cost from more work, and then extra cost and penalties from not accepting a Part 36 offer that you then fail to beat.