UK Landlord Forum / Life

Hi there, really hope you can help us.
My husband and I have a an annexe flat on side of our property and rented it out in November 2014, we advertised over gumtree and a couple offered us £850 rent and they gave us £850 deposit. We held it a separate account we used for rent only tax purposes, we just didn't know anything about the DPS.. We just were not clued up enough.
The 6months tenancy finished in May 15 and the couple wanted a new year long contract. We agreed and did another tenancy agreement with them, once this was signed everything changed, they dumped building rubbish and things in and around the property, they were noisy, dirty, wanted to build outside.  We sent them an email asking them to abide by the tenancy agreement and if they could not, we were happy for them to give us notice.   In August they gave us 1 months notice and we found another tenant to move in earlier which worked for everyone. There were a few things that needed doing, carpets cleaning, plastering bits, repainting because of the mess they made. They said they would do it but in the end they didn't. So we got the work done, agreed everything with they and the cost of it with them before taking from their deposit.  We then provided all receipts  and We paid them back £450. We signed inventories, gave them receipts for everything and tried to do the checking out correctly.

Our new tenant asked if his deposit would be held in an escrow account and when I started looking online we realised we needed to use a DPS scheme which we promptly did for the new tenant  and did that correctly.

Today we have received a notice from a solicitor (i think its a no win no fee company). The first tenants are taking us to court for not holiding the deposit in a DPS. They are demanding £5,100. They say they are owed 3 x £850 for the first tenancy (6 months) and a further 3 x £850 for the year long tenancy agreement. Although we did not take any additional deposit.
They have phoned at early hours of the morning, laughing and jeering, sent us texts. And they have come back in a builders van and dumped building rubbish opposite our house.
What can we do? Can you help?

Regarding the deposit... there is no excuse for not protecting it in a Government-approved scheme (the DPS being one). Ignorance is not an excuse.

So, if this ends up in Court, then you will lose the case and you will be forced to pay the Tenant some 'compensation'... or, more correctly, a penalty.

That's black and white. You didn't protect the deposit therefore you will lose that case and you will get a penalty.

The grey area is regarding the level of penalty - a Court must award between 1x and 3x the deposit amount... plus you must return the original deposit. You appear to have returned £450 of the £850 deposit - so your maximum liability should be £400 + £850 + £850 + £850 = £2,950. Your minimum would be £400 + £850 = £1,250.

The £5,100 is 6x - 2 tenancies. That's certainly possible... but it's in no way guaranteed - don't let them make you think that. If you are, for example, a first-time Landlord and you didn't try to just steal the money (for example, you can hopefully prove 2 things - 1 is that you held it in a separate bank account - untouched and 2 is that you actually returned £450 of the deposit at the end of the tenancy anyway) then that should hold you in good stead.

You would still lose, as you must still lose - the Court has no discretion in that matter, but it's about how much the penalty would be.

It's entirely possible it would be 1x... so in the worst case for you it would then be 1x for each tenancy and that's 2x, so £1,650.

All of the above is true if the matter goes to Court. Personally, I would offer to settle and for your lowest liability, or even less. It shows good faith on your part and get it all documented... then, if the Tenants really do take you to Court, you can show that you have been stand-up and reasonable and that they have been greedy and opportunistic. I would also have tried to record some of those phone calls and certainly don't delete the text messages!

It is not free for them to bring a case... although, when you lose you'd become liable for their costs... so you need to offer something that you think they will jump at (on the advice of their Legal Beagles) or decide now to partake in some brinkmanship.

Let us know what you're thinking...

We're in a bit of shock right now to be honest.  We are not professional landlords, or bad landlords trying to con people renting our annexe.  We only have one income as I am at home with our toddler and renting out annexe and sharing garden with tenants just helped with bills.  We had no idea that we needed to protect the deposit.  It was a mistake.

I understand though, being ignorant of need to place deposit in DPS will not be an excuse in the eyes of the law and so we will be made accountable.

Are we wise to see a local property solicitor? 

Both tenants and ourselves signed a damage deposit return receipt which listed all deductions, including receipts/invoices. We also pre-agreed any of the work that was done to sort the mess they had left.  We all signed the damage deposit receipt when they handed back the keys and I wired the £450 back to them.  We did this properly. It just doesn't seem fair that they are doing this now.  They have rented many properties before, at least 3 that we know of.  I imagine they knew they could do this all the way through the tenancy.  We had no idea (stupid, yes).

So you would offer to settle for £1,000 to £1,250?  being less than the lowest liability?  Would you do that via email directly to them or to their solicitor? Or would you wait and see a solicitor first and let them handle it? 

Would the tenants need to show the tenancy agreements as proof or anything as I do not think the tenants have a copies of either tenancy agreements as they dumped them in our bins when they left.  Could our solicitor ask them to provide their tenancy agreements?  Or would they need to when going to court?  Could that be a technical hitch for them?

So am I right in thinking if we offered them £1,000 and they refused preferring to take it to court, we would then need to pay all their court costs and their solicitors fees as well as our own?

I didn't record the phonecall as it was nearly 3am but have their texts.




It is absolutely

Meant to say many many thanks for your help btw. 

Quote from: victoria13 on October 07, 2015, 06:46:39 PMWe are not professional landlords, or bad landlords trying to con people renting our annexe.  We only have one income as I am at home with our toddler and renting out annexe and sharing garden with tenants just helped with bills.  We had no idea that we needed to protect the deposit.  It was a mistake.

In this day and age, every Landlord is a professional Landlord, or - at least - they must do things in a professional manner. Genuine mistakes are all-too-often made, but the Tenants are protected these days from those unscrupulous Landlords that also exist. Those Landlords that think a Tenant's deposit is simply a perk of the job and never have any intention of returning it. Sadly, the law cannot differentiate between which type of Landlord you are.

Quote from: victoria13 on October 07, 2015, 06:46:39 PMI understand though, being ignorant of need to place deposit in DPS will not be an excuse in the eyes of the law and so we will be made accountable.

Correct. It's good that you can accept this as you can focus on how to close this off.

Quote from: victoria13 on October 07, 2015, 06:46:39 PMAre we wise to see a local property solicitor?

I am not sure, personally, what help that would give you. The case - if it reached Court - would be open and shut. Involving another set of Solicitors is likely to just get both sets rubbing their hands with glee as more fees come their way... the only loser at the end? You.

Quote from: victoria13 on October 07, 2015, 06:46:39 PMSo you would offer to settle for £1,000 to £1,250?  being less than the lowest liability?  Would you do that via email directly to them or to their solicitor? Or would you wait and see a solicitor first and let them handle it?

Again, personally, I would try to settle out of Court. Number 1 - it allows you an element of control. Number 2 - you are taking some initiative and you're not always on the back-foot. Number 3 - making a settlement offer shows you have good faith. Number 4 - making a settlement offer yourselves costs you nothing. You would think - but can never be sure - that the Solicitors acting on their behalf and the Tenants themselves will be enticed by a significant offer made by you to them... a quick win. They will also know that their £5,100 is absolutely not a guaranteed thing at all - and you can go to great pains in your response (along with the offer) that you are also aware that their 6x is almost pie-in-the-sky and bluff-and-bluster, citing it was just ignorance on your part, it was your first time making this mistake blah-blah-blah. The amount you offer has to be an amount you can handle and an amount that is enticing enough for these parties to jump at.

Quote from: victoria13 on October 07, 2015, 06:46:39 PMWould the tenants need to show the tenancy agreements as proof or anything as I do not think the tenants have a copies of either tenancy agreements as they dumped them in our bins when they left.  Could our solicitor ask them to provide their tenancy agreements?  Or would they need to when going to court?  Could that be a technical hitch for them?

I think you are grasping at straws. Unless there was zero other trace of them living at the property... no money transfers entitled "rent" going into your account every month, no bills addressed to them at that address etc., maybe you could convince someone they never even lived there... but not just without a tenancy agreement.[/quote]

Quote from: victoria13 on October 07, 2015, 06:46:39 PMSo am I right in thinking if we offered them £1,000 and they refused preferring to take it to court, we would then need to pay all their court costs and their solicitors fees as well as our own?

If you end up in Court, then lost, I believe you would pay the costs, yes. Hopefully others will come along with advice as well. There is an alternative - ignore everything coming your way and see whether it progresses... I can't think that's a winning strategy, but I'm sure it must've been successful as people have realised how difficult and costly it is to bring a case, even if they are assured of a win. It's usually the threat, I'm sure, that gets Landlords to pay up. But, yes, there many are documented cases where Landlords have been stung with 3x as a penalty.

Hippogriff, Thank you for your reply, Yes you're right every landlord is a professional landlord.   This is so helpful and if my brain wave below doesn't work we will be following your advice.

I think maybe I have come across something that may help..... I wonder if you could consider it?

I stumbled across the Shelter site and negotiated through their questionaire to see what tenancy agreement was appropriate and I don't think AST is the right one here.  I've looked at a couple of other sites which also seem to state the same thing.  If it should not have been an AST then we would not have been required to put deposit in a DPS.  Our agreements (which they binned) just stated tenancy agreement.

We reside in the house, it is our main family house.  The annexe is a converted garage, (along the front there is an unusable garage door), we are connected, we share side entrances, the garden, patio.  We (not the tenants) use the loft space in the annexe continuosly for storage so we were always going in. We share the sheds and outbuildings and the pool and pool changing room. They even use our fridge in pool house.  We provide the weekly cleaning for the annexe, I did it or a cleaner did it (it was written into the agreement), we provided bin liners/recycling bag and sorted it all for them too on recycling day. They used our tumble drier and freezer on occassions in the utility room.  We paid the one council tax bill, water, electricity bill for the whole house (i mean including garage annexe) when they were there.  (That is just changing this month). There is one address, not a separate address for the garage, so we shared the post box and I took deliveries and their shopping for them. Sorry to ramble but you see where I'm going....We consider this one house.

On the RLA site it Note: If any of the following apply to you as landlord then the two types of assured shorthold tenancy (AST & AST room only)  referred to may well not be suitable for your requirements and you should consider an alternative form of agreement as listed below.
This applies where –
You are resident in the same house/building and you share living accommodation (e.g. bathroom, toilet, kitchen or a living room) with the tenant.
You reside in the same house/building but you do not share any living accommodation with the tenant (i.e. you do not share bathroom, toilet, kitchen or living room) and your own residence in the house/building is your only or main home. - ((Wouldn't we come under this one?)) I think we could be classed as a resident landlord.

On the landlord law blog it notes....'Tenancies granted by resident landlords are not ASTs – this is specifically set out in schedule 1 (10) of the Housing Act 1988.  This means that your tenancy will fall under the common law and slightly different rules will apply to those which apply to assured and assured shorthold tenancies.'

This talks more about resident landlords.  http://www.letlink.co.uk/index.php?option=com_content&view=article&id=332:resident-landlord&catid=81:topic-introductions&Itemid=100075
I know its a case of will they consider the building the same building but I think we could argue it is, it looks like it is from the front of the property and the arguments for resident landlord on the legal cases on this link also support us somewhat.  I think it could be quite hard for them to argue definitevly it should be an AST and if it looks more difficult than their 'no win, no fee' legal boffin to win on that basis then they might just be put off......

The garage was converted 20 years or more ago btw.

Also,  Given we were providing services..cleaning? We could argue they were considered an 'excluded occupier'...according to shelter website and here too. http://www.lodgerlandlord.co.uk/2010/03/22/five-tips-on-how-to-avoid-creating-a-tenancy-when-renting-a-granny-annex/


(I hope I'm not starting to annoy you)    Many thanks again.

No, not annoying, it's worth a punt... but my experience is with letting properties out to individuals or families in their entirety - on ASTs. You may well need to talk to a professional now to see if this is a get-out for you. I would try to sum it up into a concise defence and see whether a Solicitor working for you think it's valid.

Part of me would suspect the Solicitor for the other side has already asked these questions of their client, and is convinced enough to take on the case (as it were) which really means writing a letter, with an outlandish demand, to shake you up in the first instance. As I say, there is another strategy here - one of ignoring the letter, the threat and seeing what the fall-out is - there is a chance the fall-out could be nothing... if the Solicitor firm is a no-win-no-fee firm then you might think they're chancers, or you might think they only take on cases they know they can get a result out of. I only know that I would not want this hanging over me, the uncertainty.

If the key word is "tenancy" as opposed to "assured" or "shorthold", then you certainly had one of those... your paper was headed "tenancy agreement".

P.S. - I actually currently let out 1 property to a company too, I had no requirements to protect the deposit. Guess what I did with that deposit? I protected it.

P.P.S. - what I think you should be able to also do is this... phone up the DPS number and speak to someone about this. Say that you're thinking of letting out part of your own home, this annexe, and want to be clear on the deposit protection requirements for you, as you don't want to get burned. They may come back and say "yes"... or even "no". I don't think you have to be a registered DPS 'member' to do that... but, even if you do, you can register as a DPS Landlord today and then phone them up. Replying to emails they are very slow, but if you can get through on the phone they might be helpful... it will be, at least, another point of view - there's more than the DPS out there, obviously.

Please be careful of advice received from websites (including my own) and always do your own research.
Obviously I cannot understand your full situation from a small blog...

Victoria13
I think you should donate some money to charity and thank your lucky stars.
You do not need to protect your tenants deposit (do not go to jail and do not pay £5100  )

Despite your ridiculous low level of understanding about deposits (seriously how?) you have actually done the correct thing...however rather than relying on websites etc go and look at the Law its all on the interweb

Let me try and explain how it works:
The Housing Act 1988 has been amended in 2004 for Tenancy Deposits (yup you are about 10 years off the pace)
The 2004 Act  ch4 212 (1) states:
212Tenancy deposit schemes
(1)The appropriate national authority must make arrangements for securing that one or more tenancy deposit schemes are available for the purpose of safeguarding tenancy deposits paid in connection with shorthold tenancies.
and it goes on to say
(8 ) “shorthold tenancy” means an assured shorthold tenancy within the meaning of Chapter 2 of Part 1 of the Housing Act 1988 (c. 50);

So lets go to Chapter 2 Part 1 of the (amended in 1996) 1988 Housing Act
Assured shorthold tenancies: post-Housing Act 1996 tenancies.
An assured tenancy which—
(a)is entered into on or after the day on which section 96 of the Housing Act 1996 comes into force (otherwise than pursuant to a contract made before that day), or
(b)comes into being by virtue of section 5 above on the coming to an end of an assured tenancy within paragraph (a) above,
is an assured shorthold tenancy unless it falls within any paragraph in Schedule 2A to this Act.

So it needs to be an assured tenancy...
well whats that then ?
Chapter 1 tells us that...

1 Assured tenancies.
(1)A tenancy under which a dwelling-house is let as a separate dwelling is for the purposes of this Act an assured tenancy if and so long as—
(a)the tenant or, as the case may be, each of the joint tenants is an individual; and
(b)the tenant or, as the case may be, at least one of the joint tenants occupies the dwelling-house as his only or principal home; and
(c)the tenancy is not one which, by virtue of subsection (2) or subsection (6) below, cannot be an assured tenancy.

lets look at subsection 2
(2)Subject to subsection (3) below, if and so long as a tenancy falls within any paragraph in Part I of Schedule 1 to this Act

crumbs getting exhausted now.....but lets to to Part 1 of Schedule 1
(I'll cheat a bit and jump to clause 10 of said Schedule...

Resident landlords

10(1)A tenancy in respect of which the following conditions are fulfilled—
(a)that the dwelling-house forms part only of a building and, except in a case where the dwelling-house also forms part of a flat, the building is not a purpose-built block of flats; and
(b)that, subject to Part III of this Schedule, the tenancy was granted by an individual who, at the time when the tenancy was granted, occupied as his only or principal home another dwelling-house which,—
(i)in the case mentioned in paragraph (a) above, also forms part of the flat; or
(ii)in any other case, also forms part of the building; and
(c)that, subject to Part III of this Schedule, at all times since the tenancy was granted the interest of the landlord under the tenancy has belonged to an individual who, at the time he owned that interest, occupied as his only or principal home another dwelling-house which,—
(i)in the case mentioned in paragraph (a) above, also formed part of the flat; or
(ii)in any other case, also formed part of the building; and
(d)that the tenancy is not one which is excluded from this sub-paragraph by sub-paragraph (3) below.
(2)If a tenancy was granted by two or more persons jointly, the reference in sub-paragraph (1)(b) above to an individual is a reference to any one of those persons and if the interest of the landlord is for the time being held by two or more persons jointly, the reference in sub-paragraph (1)(c) above to an individual is a reference to any one of those persons.
blah blah blah

Well OK the law doesnt say blah blah I added that bit
But now you see how you Ms. Jammy Dodger as a resident landlord you could not have entered into an AST or an Assured Tenancy
Even if you had written on top of the Tenancy Agreement in big fat red felt tip and added glitter on top ASSURED TENANCY AGREEMENT it still would not have been an AST - (seriously cannot understand why folks think they write something on a piece of paper and the law changes to accomodate them)
(Just to be clear I have assumed the rest of the schedules apply to your specific circumstance, which is reasonable to assume but I cannot be 100% sure without all the info).
So as you never had an AST the requirement to protect t he deposit doesn't apply...
There are 14 types of tenancy agreement in England not all of them require deposits to be protected.

So that leaves the fun non-lawyer bit
How much sh!t do you want to throw at these complete and total morons?
Me I would throw ---- none.
Let them spend money, let them write letters
let them huff
then puff and waste more time and money

You meanwhile chill out, relax, determine which charity you will donate to....
Landlords 1 - Shitbag Tenants 0   YAAYYY

However I suspect you want to put this episode behind you so simply send back a letter:
""
Dear Shitbags,
After taking legal advice we submit that pursuant to the 1998 Housing Act the tenancy agreement was neither an Assured Tenancy nor an Assured Shorthold Tenancy Agreement and therefore chapter 4 of the 2004 Housing Act does not apply.
Get stuffed you parasitic sh!ts

All my Love
Victoria
""

To me is sounds like a mate of mate at the pub has told your tenants about DPS etc and now they think they can play you.
I actually would get the name of their law firm and then make a complaint to the Law Society.

The Law Society are wonderful people and I have used them 3 times - each time the law firm I was arguing with settled before the claim went all the way.  Two other "cases" didn't even go that far, just the threat of me submitting the case to the Law Society was enough.
Lawyers aren't smarter they are just trained differently.

By the way did you know you were potentially (I need to know more) eligible for Rent a Room tax relief?
Can provide tax advice as well...

Please note I am not a lawyer (just a grumpy miserable landlord) and for your own sanity you may want to consider blowing some cash on a lawyer but I have tried to lay it all out for you above..in terms that even someone that didnt know about deposits can understand 

By the way Hippos advice on the DPS isnt bad at all.
I've found them to be quite helpful on basic stuff...although this question might be beyond them.

Best of luck

I want all this to be true and I am glad the OP brought this additional information to light because a normal AST separate house let would definitely fall into the normal category. It is absolutely the case that not all deposits require protection, a company let like I have is a perfect example. I am not clear on the position with the annexe with the same address, but there seems to be some good collateral posted above for you to review.

I would urge you try to get an objective expert opinion on this rather than trying to interpret the legislation yourself - I think, once you have the confidence it is as theangrylandlord says, you can have a field-day. The caveat to everything is that the other side must have also reviewed the detail and still think it's worth a punt, a shake of the tree... but that first letter might be all you ever hear if there is no case to answer. I'm assuming it's some kind of standard form letter these places use, so the initial effort for them is low and some will pay-out immediately.

Can you let us know how you get on?

Oh perhaps I was being too articulate...

Have a look at the following link and see the text in the first grey box

https://www.depositprotection.com/legislation

It's common knowledge...

I was trying to explain above what technically a Resident Landlord is....

You are on good ground (but of course get it checked out)...

Best of luck

The OP might want to put on-hold anything that is happening right now with Council Tax (inference by me was that this was changing so they'd be separate in future) especially if initiated by her... this is a good proof-point that it's the same residence, the others are good too, but Council Tax is always one of the best. If it was a single residence, single address, single Council Tax bill, then - even though it's an annexe and not a room - you would think the OP is on good ground, as said.

Dear TheAngryLandlord,
I can't believe you actually typed all this out, no wonder you are permanently stressed. You are amazing.
Just to help some knob-end novice landlords out (I'm obviously one of them). I'm learning so much from this site and this forum. Thank you

Inthemoshpittt
You're most welcome.
Happy to help out.
It's a bit disappointing when the OP doesn't reply but I hope others like you can profit also.

I think these days the newbie Landlord needs all the help they can get and sadly now a lot of it is legalistic which is very hard to fathom but most importantly it's the emotional stress and feeling of being lost that's hard to cope with so hopefully I and other regular posters (hippo, davidm, bob, ript, Martha etc ) can help a few folks out...

Just red this too.
The angry landlord you are a star. I didn't think about the council tax bit, but of course! It is really quite clear. But yes research is the key to all of these things and there actually is a lot of information out there!

Dear TheAngryLandlord,

How wonderful to have a thoroughly helpful well researched reply to a problem that was obviously causing a great deal of angst, worry and grief to Victoria13. I too hope the original poster responds to let us know the outcome.

Hi Hippogriff / Angrylandlord
It is I.....the OP. 
Sorry to not have come back before now.  We are working with solicitor at the moment so I can't really give you details of the latest as this site is public.  I will give you the full details when we have the outcome though.

I must say, work had really gone into your answers - careful and considered.  Very grateful for that. 

Loads of thanks

TheangryLL - very funny, and helpful.

I'm very glad I stumbled upon this website whilst looking for advice on increasing rent.

Hippogriff - selflessly helpful too. Seem to remember you being the same on SingingPig. If my memory serves me well.