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Jul, 2014

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  1. #1

    Default Tenant taking me to court over deposit

    Hi guys, I'd really appreciate sme advice. I placed a tenant into my property some six months ago under a twelve month AST.

    I don't place a deposit in a government scheme, instead, I charge my tenants an admin fee towards referencing etc. there is NO mention of any deposit or monies held in the AST.

    In this instance I used a lettings agency to find my tenant and reference I have just found out that when the agency took his admin fee and ran the referancing, they issued him with a receipt which mistakenly said that his fee was for a security deposit rather than admin charge.

    Tenant stopped paying rent after five months. When questioned, he said he was leaving the property convinced he had signed a six month contract! After I explained that he signed for a year, he said he couldn't afford to stay and the left, effectively abandoning the tenancy.

    Out of the blue. I have been contacted by a no win no fee law firm. He's taking me to court saying that I am illegally holding his security deposit. I have explained to his representative that he abandoned the property and was in breach of contract. I also explained that the AST makes no mention of a security deposit. Trouble is, he says that the receipt issued by the lettings ageency is proof of a deposit and though he agrees that he did not provide notice and left the property illegally he says that I am still liable to pay him back a deposit as I illegally held money outside of a government scheme!

    They are apparently going to persue through a small claim court! Can someone out there advise me if the scumbag has a leg to stand on here? Surely he breached the contract and thaany all that should matter? any advice would be much appreciated...

  2. #2
    Join Date
    Jul 2008
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    You can't be pursued throu the small claims track for non-protection of the deposit, it is a part 8 claim and must be heard in the fast track or multi track. That means court fees of at least a thousand pounds. That may be enough to discourage the claim, but if they follow it through, and you lose, you could be ordered to pay that too.

    If the tenant is only claiming the value of the deposit (ie not a penalty) then that may well be a small claim. You would presumably counterclaim for the breach of the tenancy and defend his claim pretty much as you have explained here.

    Your 'offence' of not protecting a (potentially non-existant) deposit does not affect your ex-tenants obligations.

  3. #3
    Join Date
    May 2009
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    14,115

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    A claim for non-compliance with deposit protection is not heard in the small claims track, but the multi-track. The court fees are a lot higher and each party is exposed to the other party's legal costs.

    If T claims against you, then you must not only defend the claim by arguing that the deposit wasn't a deposit, but by counterclaiming for rent due under the terms of the contract. You will need the letting agent to agree to act as witness that the money taken wasn't a deposit.

    How much was this 'admin fee', though? And did the agent not charge VAT on it if it was an admin fee? (which would be a very strange oversight).

    How much is the monthly rent? Have you re-let the property? (if so, how long after T vacated?)

    Is this 'law firm' real? Have you checked their credentials?

    (BTW, why on earth didn't you ask for a deposit???)

  4. #4
    Join Date
    Nov 2008
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    661

    Default

    This shows shy I get into ARGUMENTS with my letting agents to ensure they call their admin fee just that instead of a deposit. I explain all the implications to them, and THEY STILL DON'T GET IT!

  5. #5

    Default

    Hey guys, thanks or the replies, I really appreciate your assistance and knowledge. I have now filled the property, it was empty for at last a month. I also had to pay around 600 pound to refurb after he left, all of which I have receipts for. The admin fee I charged was one month rent. Trouble is, the letting agent gave him a receipt (of which I now have a copy) which says, one month security deposit, one month in advance, agency Amin fee, etc. So far, I have only had two phone calls from the law agency. We reached an impass on the phone with me saying that I reuse to pay a penny back. He says they will peruse me through a small claims court for three months tendency (£1200). I'm even more scared now that you guys say I might have today court costs! Can you give me some advise guys? Will I have the option to settle before we get to court? Is it worth paying this joker his £400 back?...

  6. #6
    Join Date
    Jan 2005
    Posts
    4,997

    Default

    Quote Originally Posted by Perplexed View Post
    This shows shy I get into ARGUMENTS with my letting agents to ensure they call their admin fee just that instead of a deposit. I explain all the implications to them, and THEY STILL DON'T GET IT!
    Hmm. Shows why I don't get involved with letting agents full stop..

  7. #7
    Join Date
    Jan 2011
    Posts
    3,147

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    I month rent for credit & other ref checks is mighty high and some may be seen as a disguised deposit, esp if OP instructed LA to charge that level of fee. OP is beyond the grace period allowed by the Localism Act, so whether deposit is repaid or not, IMO he is still liable for 1 - 3X penalty.

  8. #8
    Join Date
    Dec 2010
    Posts
    619

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    If I were you I would offer to settle. Point out that you'll fight the case on the basis that, whatever the receipt says, the 'deposit' was in fact an admin fee and charged for services provided to the tenant rather than held as security for his obligations. When working out an amount to offer as a settlement consider that if you lose you will have to pay back the amount of the 'deposit' plus a penalty of at least the deposit amount again and possibly up to three times the deposit at the discretion of the judge. You may also have to pay the tenant's court costs.
    Disclaimer:

    The above represents my own opinion, derived from personal knowledge and should not be relied upon as definitive or accurate advice. It is offered free of charge and may contain errors or omissions or be an inaccurate opinion of the law. I accept no liability for any loss or damage suffered as a result of relying on the above.

  9. #9
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    Jan 2005
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    Quote Originally Posted by mariner View Post
    I month rent for credit & other ref checks is mighty high and some may be seen as a disguised deposit
    I agree it's very high, but if there was never any intention to pay it back (eg "if you return the property undamaged I'll return the admin fee as a thank-you") then surely that deals with the main definition of a deposit?

    All of which appears to be a moot point given the unfortunate receipt which states that it IS a deposit though...

  10. #10
    Join Date
    Jul 2008
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    Bigboy, can you provide any proof that this 'one month' admin fee was your standard practice, even better, can the agents confirm it if they have dealt with previous tenants for you? Do you have anything in your instructions to this agent that they should charge such a fee? Being able to prove (or at least, convince a judge) that will be essential.

    If it is any consolation, I get the impression that the 'law agency' are not experts in this field.

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