Can tenants/solicitors claim deposit back from a landlord that never received them?

[CH1]

I have an unusual situation in that last year I bought a tenanted property from an agent who was also the previous landlord.

I became the new owner in the last month of the tenancy, then the tenants left. Property was left in a poor condition and took me quite a few weeks to sort it, they claimed that is how it was at the start, not being owner/landlord at start I couldn't debate it.

Anyway, No deposit was ever transferred to me from the previous landlord. I believe the old landlord held the deposit in mydeposits, an insurance backed scheme, they did not use the custodial scheme. Also this landlord had also received rent in the last month (when I was new owner) as some of the tenants forgot to change their standing order details so rent automatically got paid into their bank accounts. I requested the return of this rent for at least 6 months by personal contact, letters, phone calls even debt collectors had no luck re-claiming it. In the end, one day the letting agent sent a letter stating due to economic downturn they would no longer be trading, hence no return of rent.

Similarly, the tenants tried getting their deposits back from agent/old landlord for 6 months too, with no luck. Then finally I received a letter from a solicitor acting on behalf of the tenants asking me to pay back the deposit.

It stated "agent X is no longer trading and searches at Company House reveal they are being struck off. Accordingly, under Housing Act 2004, you as landlord of property at end of tenancy are responsible for repayment of the deposit." This particular agent/landlord appear to be extremely good at keeping other people's money. They seem to conveniently go out of business as it suits and keep other people's money, yet their personal assets and residential home no way reflect any signs of an economic downturn.

The letter also stated "please sent xxx amount to repay the deposit and ensure it is not necessary to commence proceedings for its recovery".

What are my options? How can I return a deposit I did not receive?

Also one of the named tenants that is seeking legal action is not named on the tenancy agreement (as half way thru' the contract I believe s/he swapped with a tenant that was leaving. This particular tenant also accidentally paid last months rent to old landlord/agent so I am due rent anyway, so there is no way I can pay a deposit that was never paid to me.

Spoke briefly with acting solicitor he says its a case of deferred liability and there's a loophole in the law. I've took some brief initial advice and been told to state that tenants did not have a contract with me (as I did not issue a new one in last month of their tenancy) and if they claim I do, then I can counterclaim the missing rent they owe me -as although they paid it -it was not paid to me.

Really can't see how I can be asked to pay a deposit that I did not receive?! Any advice greatly received.

[Mortitia]

Hi CH1,

I would argue that you had no contract with these tenants and therefore bear no responsibility to them. Indeed, they left the property of their own free will - didn't they?

The one who had moved in without being on any tenancy agreement has no case against you.

What you should have done was get the vendor to transfer all info on the current tenants/deposits to you at exchange of contracts so you or your solicitor could look into the correctness of all this and avoid this problem now. Hindsight is a wonderful thing. Did your purchase solicitor not advise you on this? I would say he/she was negligent in not doing so.

Are these ex-tenants likely to bring a successful case against you? I would say not as you can prove you did not have access to their depsosits and really they should be chasing the previous owner who does seem successful in avoiding them.

Could be the tenants solicitor is just 'trying it on' to see if you cough up. You have a reasonable defence and I can't see how, on what you write they can pursue you.

Mortitia

[Melboy]

"Could be the tenants solicitor is just 'trying it on' to see if you cough up. You have a reasonable defence and I can't see how, on what you write they can pursue you".

I'll second Mortitia's statement.

Mel.

[Simon Dewsberry]

No precedent set that i have seen on this one !

Liability will definately fall on LL - but unsure what will happen here as you personally didn't take it !

[CH1]

Hi CH1,

I would argue that you had no contract with these tenants and therefore bear no responsibility to them. Indeed, they left the property of their own free will - didn't they?

The one who had moved in without being on any tenancy agreement has no case against you.

What you should have done was get the vendor to transfer all info on the current tenants/deposits to you at exchange of contracts so you or your solicitor could look into the correctness of all this and avoid this problem now. Hindsight is a wonderful thing. Did your purchase solicitor not advise you on this? I would say he/she was negligent in not doing so.

Are these ex-tenants likely to bring a successful case against you? I would say not as you can prove you did not have access to their depsosits and really they should be chasing the previous owner who does seem successful in avoiding them.

Could be the tenants solicitor is just 'trying it on' to see if you cough up. You have a reasonable defence and I can't see how, on what you write they can pursue you.

Mortitia

Thanks everyone for your thoughts on this.

Mortitia, I did ask the vendor to transfer deposits to me, but they are extremely difficult set of people to get to do anything. One of their staf said as you're in last month of tenancy we'll hold onto it. Indeed my solicitor at the time did contact theirs and asked for all future rents to be paid to myself and for any deposits to be paid to me, this was not done.

The tenants seem persistent in chasing this deposit it's been going on now for almost a year and when they found out the old vendor who is also old agent ceased trading they are now chasing me for this deposit that I never received, simply because the law states lability lies with the landlord..whoever it may be. Makes the deposit scheme (Insurance one at least) a waste of time!

Well see what happens, will argue my case.

[Melboy]

Does make you wonder why a Landlord who has not had his hands on the deposit money should be liable.

Is there not a case then for the Landlord to actually be holding this money rather than an LA?

I have a large deposit with an LA that has been there for 4 years......should I not be asking for this money to go into the deposit protection scheme?

Mel.

[Gee]

I remember the problems you had when you were buying this, with hindsight the bad vibes were pretty clear at a very early stage.

Looking at it objectively, having bought the property, you quite reasonably expected the tenant to pay rent to you, conversely the tenant would expect the New landlord to return the deposit at the end of the tenancy (providing there were no dilapidations). The tenant was not party to the contract between you and the vendor and it is not their fault the deposit wasn't paid over to the new landlord.

There was a short item in yesterdays Daily Mail, where a buy to let Landlord had gone bust, the deposit disappeared and the receiver stated that the receiver would therefore have to be responsible for the repayment of the deposit.

I do sympathise with you because at the time you tried to do the right thing but were given the runaround by the agent/vendor.

My only useful thought was the property owned by the agent as an individual or as a company? The reasoning being that if the property was owned as an individual there would appear to me to be no reason why you can't continue to make a claim against the previous owner as an individual for the outstanding rent and deposit?

Sorry I can't be more positive.

Gee

[CH1]

I remember the problems you had when you were buying this, with hindsight the bad vibes were pretty clear at a very early stage.

My only useful thought was the property owned by the agent as an individual or as a company? The reasoning being that if the property was owned as an individual there would appear to me to be no reason why you can't continue to make a claim against the previous owner as an individual for the outstanding rent and deposit?

Sorry I can't be more positive.

Gee

Thanks for your thoughts. Yes, initially it started out looking a good buy (and with a good 7% yield), but as time went on and we discovered just what sort of people we were dealing with here, I'd already spent quite a bit of money on the purchase and wanted to finish the process. In the meantime the 'credit crunch' started and lenders who were lending stopped lending including mine, so I appealed with the lender who originally gave me a DIP and Offer to re-open the offer -which they did. After refurbishing the property managed to get next set of tenants -all good positive cash flow yields, but didn't think the old history of ex vendor/ex agent and the old tenants would come back and hit me back.

Some of the old tenants also owe me rent as accidentally it got paid to old landlord/agent who never returned it to me despite contacting for several months-so I am owed an equal amount of rent as they seek deposit (that the old landlord/ex agent has kept).

When buying the property -it was in the name of the individual couple not their Lettings company that has now stopped trading. The contract they issued was by their Lettings company and the deposit was held thru' their company under mydeposits.