Recovery of rent arrears

[Paulhar]

Hi All,

A couple started renting a house from me about 6 years ago and all was fine until March of this year when they split up and the husband moved out. The wife said she wanted to carry on living there and I issued her with a new tenancy agreement to help with her housing benefit claim.

Rent arrears soon started to build and now, with around £2500 owing, I have given her notice to quit using a Section 8. This morning I received a call from Housing Services saying that she was entitled to sue me for three times the deposit (total of £1884) because I did not put her deposit into the Deposit Guarantee Scheme when the new tenancy started in March. They also said that I can only keep her deposit to cover damage - not for rent arrears despite this being spelled out quite clearly in the tenancy agreement. Is this true ?

She has found somewhere to go to and is planning to leave peacefully but I think she still expects me to refund her £628 deposit.

Any advice as to the best course of action would be greatly appreciated

Paul

[Preston]

Hi Paul

On the face of it you do have a problem, in that if she paid you a deposit in March and you havent protected it, then she can indeed sue you for 3 times its value. I dont agree, though, that you cant offset rent arrears against the deposit if your tenancy agreement says you can. If I were you, I would ask them which statute, regulation or case law they are basing their opinion on. If they are a local authority housing service they ought to give you this information, if they have it. Once you have the information, you can then check to see if it is correct.

I know this is a bit of a long shot, but it might be worth giving some thought to whether your tenant has in fact paid a deposit. When you granted her the new tenancy, did you just retain the deposit which related to the old tenancy, or did she pay a new deposit and was this recorded in the tenancy agreement? If she hasnt actually paid a deposit, clearly you cant be sued for failing to protect it. What you then do with the deposit on the previous tenancy is a separate matter.

If you decide she has paid a deposit, then you have a difficult judgement to make I think. You could end up letting her off the arrears only to then face an action for 3 times the deposit. Unless you are sure that by forgoing her deposit you will be avoiding such an action on her part, my inclination would be to retain it. If there any other chargeable items, such as damage to the property, it might also be worth gathering the necessary evidence to back up a claim against her, should this prove necessary.

Good luck

Preston

[J4L]

Hi Paul

I know this is a bit of a long shot, but it might be worth giving some thought to whether your tenant has in fact paid a deposit. When you granted her the new tenancy, did you just retain the deposit which related to the old tenancy, or did she pay a new deposit and was this recorded in the tenancy agreement? If she hasnt actually paid a deposit, clearly you cant be sued for failing to protect it. What you then do with the deposit on the previous tenancy is a separate matter.

Good luck

Preston

Definitely a VERY long shot sorry.

Any new agreement made after April 2007 needs to be protected, effectively OP has ended/surrendered the old agreement in favour of the new one and thus the deposit should be protected.

I'd take my chances on this one if it were me and let them sue me if that's what they wish because rental arrears can be claimed against deposits.

[Preston]

Hi J4L

Yes, you are right, it probably is a long shot. But if I was facing a potential action for £1,884, I would want to consider all the options very carefully. And sometimes it helps to think a bit laterally. Probably the key question is, is there paperwork showing that she paid a deposit when the new tenancy was created, or has it just been "assumed" that the old deposit carried through? If the former, it should have been protected. If the latter, well, I'd start thinking about getting some advice about the status of that old deposit.

Preston

[J4L]

Like I said I'd take my chances on this one.

If they sue for not protecting it I'd counter claim for the rent arrears.

[Paulhar]

Hi All,

Thanks for the replies.

On the new tenancy agreement I gave her in March it just stated that the deposit was £628 - it didn't say how or when it was paid. If I had carried out an inspection and deducted money for repairs in March then that would suggest it was a 'new' deposit but housing services are saying that the fact it was a new tenancy agreement is enough to require the deposit to be held in a guarantee scheme.

I have just phoned Housing Services back and the lady who told me rent arrears cannot be deucted from a deposit is on leave but everyone else in their office says it can so I will assume she doesn't know what she's talking about.

I spoke to a solicitor yesterday and he said that, once she has moved out, she is no longer my tenant and there is no need for the deposit to be guaranteed which sounds a bit dubious to me but he seemed to think that, if it went to court, her case would be pretty weak.

While she was out shopping this morning I had a look around the house (yes, I know that's naughty of me!) and the place is in one hell of a state - every carpet will need replacing and every wall will need repainting. It will cost way more than the £628 deposit.

She is planning to stay local so I think I'll just keep my distance until she has gone and then I have much more in my favour. I have recently discovered that she owns a car worth about £3000 and I am seriously considering depriving her of it until she sees my point of view.

Paul.