UK Landlord Forum / Life

Ok gang, I'm waving a white flag as I've messed up here, so please be nice (or if after reading the below that won't be possible, then just like your mum used to tell you, if you haven't got anything nice to say and all that.... )

I've been using the same management agent for a few years as a fully managed solution for all my properties. Recently (as in a couple of months back), the existing tenants moved on, the agent found new ones, got the AST agreement sorted, I then "of course" signed it without checking it all the way through and sent it back. A couple of months have gone by, I've been on holiday, life moves on.....

Whilst working through my now slightly bruised finances as a result of "having it large" just a little more than planned whilst away, I've just noticed a large amount of cash sitting in one of my bank accounts that I had no idea where it had come from. Happy days you might be thinking? Except when I checked, I found that this amount had been paid by the management agent over a month ago, and to my horror I now realise that the latest AST agreement they issued is different to previous ones in one important aspect: it now clearly states I, as the LL, am liable for the tenants' deposit and it's protection, so the agent has paid the deposit into my account instead of taking care of this themselves. Worse, being as I don't check this particular account very often (yeah, I know!), I am now in breach of the law as I haven't protected the deposit and advised of the scheme details within the required length of time.

Now, I realise that as your website states "It is ALWAYS the landlord's responsibility to ensure the deposit is protected, even if you use a letting agent." HOWEVER, the agent has always taken care of this previously - Obviously I've written to the agent pointing this whole debacle out now that it's come to light, but should I do anything else other than ask them to reissue contracts to both parties (which is what I assume now needs to happen)? I have just decided I'm going to negotiate a hefty discount on the agent's management fee as mentioned in my other posts anyway, but if the agent won't play ball on this and I have to take my business elsewhere then I'm assuming the poor old tenants would then have to sign a third AST agreement issued by the new agent?

Any pointers appreciated on where I stand and the best possible courses of action?

Cheers!

(A few lessons learned for me here as you can imagine)

Quote from: Dj_efk on August 03, 2014, 10:08:30 AMNow, I realise that as your website states "It is ALWAYS the landlord's responsibility to ensure the deposit is protected, even if you use a letting agent." HOWEVER, the agent has always taken care of this previously - Obviously I've written to the agent pointing this whole debacle out now that it's come to light, but should I do anything else other than ask them to reissue contracts to both parties (which is what I assume now needs to happen)?

It doesn't matter if the Agent has done this previously. It is still - and always has been - the Landlord's responsibility, solely. Even if the Agent was supposed to do it for you, or not, the Landlord is the only one who ends up being liable... the Agent can never end up being liable for the penalties.

Now, the position you are in is that you can't legally serve a Section 21 on these Tenants to obtain possession of your property, not without returning the deposit to them in full. So, if you think you will want to serve a Section 21 on them at any time, then you will need to address this first - deposit must be returned in full before you can legally serve a Section 21. Just make note of that.

Sadly, you are also liable (just as if the Agent was supposed to have looked after protecting the deposit for you, but didn't) for the penalty of between 1x and 3x the value of the deposit - plus the original deposit - if the Tenant decided they would like to sue you for this admin. error - which is all it is. Most Tenants are reasonable, right, but some might see an easy way to make some cash here - and they would be successful. Firstly you'd have to return the entire deposit - no deductions, then you'd need to pay them between 1x and 3x the deposit - there's no chance of you winning in Court. However, don't fret too much, as it's highly unlikely the 3x would apply.

So - summing it all up - if the deposit was £1,000 then you could be liable for between £2,000 and £4,000 to the Tenants (if it ever gets to that bad point) - but, yes, £1,000 of that would be the Tenant's original money anyway.

So, I think you need to do some initial housekeeping to get things in order.

It's certainly not as simple as re-issuing contracts to both parties... as far as I can tell (unless you advise differently?) I can't see that that serves any purpose anyway? The AST is still a valid AST. Everything you've talked about is the deposit... the tenancy is not (should not be?) affected.

It's not the end of the world, but it limits your eviction options for this particular Tenant and it could cost you a bit of money - and it's all just an honest mistake - but there's chance the Tenant might appreciate their deposit back in full and some goodwill compensation, as opposed to a long, drawn-out, Court route in an effort to get you to "pay up".

Yes, it all seems a little unfair. It's an admin. error and it's also six of one and half-a-dozen of the other (possibly) between Letting Agent and Landlord, but I'm afraid it's only you that is liable. If you get the Agent to put their hands up to anything and do good by you - well done.

And, yes, you've learned that you should always read contracts put in front of you, regardless of whether you assume they're the same as before, or not - it's a valuable lesson for us all in life.

You could get, with agreement, the deposit into a deposit protection scheme ASAP and serve the Prescribed Information and Terms and Conditions... if you have a savvy Tenant they could make note of the fact that this has been done late. They could also not really care one jot, right?

What's more annoying is that you've just discovered this outside the timeframe... if it was a fortnight ago maybe you'd be able to do all the necessary ASAP.

P.S. - one of the most strong pieces of advice I've ever had for any Landlord (no matter how hands-off you'd like to be) is not to entrust any other party with the protection of the deposit - no-one else is ever going to be liable for if it's not done correctly / in time. It's sometimes a PITA to do this, but it can't be avoided.

Quote from: Hippogriff on August 03, 2014, 11:53:53 AM

It's certainly not as simple as re-issuing contracts to both parties... as far as I can tell (unless you advise differently?) I can't see that that serves any purpose anyway? The AST is still a valid AST. Everything you've talked about is the deposit... the tenancy is not (should not be?) affected.

It's not the end of the world, but it limits your eviction options for this particular Tenant and it could cost you a bit of money - and it's all just an honest mistake - but there's chance the Tenant might appreciate their deposit back in full and some goodwill compensation, as opposed to a long, drawn-out, Court route in an effort to get you to "pay up".

You could get, with agreement, the deposit into a deposit protection scheme ASAP and serve the Prescribed Information and Terms and Conditions... if you have a savvy Tenant they could make note of the fact that this has been done late. They could also not really care one jot, right?

What's more annoying is that you've just discovered this outside the timeframe... if it was a fortnight ago maybe you'd be able to do all the necessary ASAP.

I was thinking the best thing to do would be refund the deposit back to the agent and get them to reissue contracts with the original clause naming them as responsible for the deposit as the best way of correcting the mistake. Are you saying I should now just go with what's been done already and put the money into a scheme rather than try and backtrack to the previous arrangement?

I am assuming the agent will be willing to correct their mistake where possible so hopefully they should sort this out, but if not and I continue to be directly liable for the deposit as the contract now states and therefore put it into a protected scheme tomorrow, I understood from the above that this could put me in a bad negotiating position (and will still have to just refund their deposit in full with as if it was never protected at all rather than just late into the scheme), for the rest of the tenancy if something goes wrong later down the line even though, so far, this tenant seems perfectly fine - is that what you're saying?

Not ideal I know, but sat here thinking through my options maybe I just protect  the deposit and supply the details now, then it's possible the tenant won't be any the wiser given that I'm only a couple of weeks late?

It's worth pointing out so far that I haven't heard a peep out of the tenants on this (via the agent of course), I noticed it myself. The agent has done a through vet and they are a young professional couple so with a bit of luck they are unlikely to be total scumbags to the point where I'll want to serve them S21.

Thanks for you help so far

Quote from: Dj_efk on August 03, 2014, 01:17:33 PMI was thinking the best thing to do would be refund the deposit back to the agent and get them to reissue contracts with the original clause naming them as responsible for the deposit as the best way of correcting the mistake. Are you saying I should now just go with what's been done already and put the money into a scheme rather than try and backtrack to the previous arrangement?

You would still be liable for the penalties for not protecting the deposit for this tenancy in time. Just because another AST arises, replacing this one, does not mean that the other failure can be forgotten about, sadly.

Quote from: Dj_efk on August 03, 2014, 01:17:33 PMI am assuming the agent will be willing to correct their mistake...

I thought the Agent deliberately updated their documentation so you, as Landlord, became liable for protecting the deposit? If so, is there a mistake on their side here?

Quote from: Dj_efk on August 03, 2014, 01:17:33 PM...if not and I continue to be directly liable for the deposit as the contract now states...

You - the Landlord - are always directly liable. No matter what the Agent does, or does not do, on your behalf.

Quote from: Dj_efk on August 03, 2014, 01:17:33 PM...it's possible the tenant won't be any the wiser given that I'm only a couple of weeks late?

Sure, none the wiser is good for you, but maybe they simply don't care as long as the deposit is looked after and treated fairly... not everyone is on the make in this world and not everyone thinks a Landlord should be punished for an admin. error or oversight. Sure, there are Tenants like that, we know there are... that's why we have to be on our toes. Deposit protection is Landlording-101 these days. If a Landlord hasn't done this I always (can't help it, I'm afraid) do start to worry about other obligations. This is not meant to have a go... it's just dead basic stuff and it's been like this for years now, it's not something that's just come into law recently. Not saying the law is good... but I - myself - prefer to have the deposits of my Tenants held with the DPS, rather than my bank account - it is their money, not mine and it would not feel right, to me, to hold it / have access to it. Despite Agents being 'professionals' I would not ever trust them to do this for me. What if the Agent disappears / goes bankrupt... the hassle of trying to figure out the deposits held under their Agent ID would be a nightmare.

Quote from: Hippogriff on August 03, 2014, 10:12:31 PM

Quote from: Dj_efk on August 03, 2014, 01:17:33 PMI am assuming the agent will be willing to correct their mistake...

I thought the Agent deliberately updated their documentation so you, as Landlord, became liable for protecting the deposit? If so, is there a mistake on their side here?

I don't know / can't assume it was deliberate, there would've nothing to gain from doing this and deliberately not highlighting it. I guess I will see what they say later today before acting. Annoying though as from what you say there is now no way of escaping the possibility of consequences for me personally. I will certainly be complaining / re-thinking my processes and mentality around tenant deposits so thank you for opening my eyes.

Quote from: Dj_efk on August 03, 2014, 10:49:40 PMI don't know / can't assume it was deliberate, there would've nothing to gain from doing this and deliberately not highlighting it.

I like to think about what motivates people.

Your comment...

Quote from: Dj_efk on August 03, 2014, 10:49:40 PM...there would've nothing to gain from doing this and deliberately not highlighting it.

...initially sounds true. No benefit... just confusion caused and risk created. Doesn't sound like a good idea, so must be a mistake, right?

However, there is benefit to them from the first part of the sentence...

Quote from: Dj_efk on August 03, 2014, 10:49:40 PM...gain from doing this

Yes, their gain is less effort, less admin., less hassle etc. from not doing the deposit protection any more. It's a nice thing, for them... they've reduced effort.

But the second part...

Quote from: Dj_efk on August 03, 2014, 10:49:40 PM...and deliberately not highlighting it.

...comes down to Human nature again... by implementing their new 'policy' by sliding a new or revised term into the AST, they get to do less for their money and they avoid a difficult conversation with their Landlords. Win-win. No bad news, no difficult discussions with dissatisfied customers.

Simple (I think).

Or is that me just looking at the bad side of people?

Be good to hear what they say today.