Tenant

Financial issues in Assured Short-term Tenancy Agreement

As with most things in life, finance plays an important part with tenancies. Below, we've are some of the financial issues that may arise broken down into four sections:

  • 1. Deposits
  • 2. Rent
  • 3. Rent arrears
  • 4. Financial issues outside your control

 

1. Deposits

There are alternatives to tenancy deposit:

  • a. Landlords can seek a guarantor. Attractive even if taking deposit, but essential if not. The guarantor should be a home owner, liable for any financial loss. This arrangement must be specifically built into the tenancy agreement.
  • b. A landlord could grant an assured tenancy, thus fall outside a scheme. Under this arrangement, landlords can never give two months notice and the tenant could live in the property for life. This option is ideally suited to student let's as it is very unlikely they will stay beyond the term - and if they did, they are liable to pay full market rate.
  • c. Tenants may be able to secure a property without a deposit, there may be a "deposit guarantee scheme" in that area that can help tenants find accommodation. Seek advice on this issue.

 

Paying a deposit.

 Tenants who paid deposits on or after 6th April 2007, where the combined annual rent is less than £25,000, the deposit will be protected by new rules. These say that landlords must put deposit in a tenancy deposit protection scheme. At the end of the tenancy, you are guaranteed to get deposits back within 10 days, as long as you and your landlord have agreed on how much should be returned.

 

Reasons why landlords may ask you for a deposit:

a) Holding Deposits are used to guarantee that the individual will take up the tenancy and the landlord or agent is guaranteeing to let it to them. Holding deposits shouldn't be an added cost.

b) Landlord security. Although there is legally no limit on the amount that can be charged, landlords or letting agents usually ask for the equivalent of one months rent, with agencies usually charging six weeks. A deposit gives your landlord some security against any financial loss he/she may suffer as a result of damage.

 

Protecting your deposit. 

There are two types of deposit protection schemes available for landlords and letting agents (insurance-based schemes and custodial schemes).

The three most popular options:

1. The Deposit Protection Service is the most popular. The deposit must be held by the scheme administrator for the duration of the tenancy. The Custodial Scheme offers free usage and interest to the landlord / tenant.

2. My Deposits is a pay as you go insurance based option, which allows the landlord to hold the deposit, but the landlord must pay to use the scheme. Landlords are advised to ensure that the scheme does not cost more than the interest that is recoverable on a held deposit.

3. The Tenancy Deposit Scheme is another insurance based option, popular with multi-property letting agencies, priced on per office, rather than per property, basis.

 

How the 2007 law affects tenants and landlords

This 2007 law has implications for existing assured short-term tenancy agreements. Entering an extra paragraph / clause in an original agreement may not be enough. For example, tenants are entitled to know, and LANDLORDS must provide:

a) Full contact details of the scheme administrator

b) All operating information of the provisions of the scheme

c) Procedures for payment and repayment of the deposit

d) Procedures that apply in case either the landlord or tenant is not contactable when the tenancy ends

e) Procedures for dispute over the deposit

f) The scheme's facilities for dispute resolution without litigation

g) Full details of the tenancy in respect of which this deposit is concerned-

  • Deposit amount
  • Tenancy property address
  • Full contact details of landlord
  • Full contact details of tenant, including those for the purpose of contacting the tenant when the tenancy ends
  • Full contact details of any other relevant person
  • Circumstances and terms relating to the retention of part or all of the deposit

If you don't agree on how much you should get back, there is a free service which you and your landlord can use to help sort out your disagreement. Minimise the potential for disagreement at the start of the tenancy by getting clarification of exactly what the deposit covers (e.g. whether it covers unpaid rent and/or loss caused by any damage.

Deposits - a tenant's rights.

  • A landlord should not deduct money from a deposit to cover bills unless they suffer financial loss, for example, in having to pay for the installation of a pre-payment meter or, to reconnect services.
  • Wear & tear. Private landlords would be expected to redecorate and replace carpets and furnishings every few years, recovering the cost through the rent they charge; tenants should only be held liable for any damage that creates additional costs to a landlord.
  • Tenants are only liable for "like for like". Therefore, tenants are only liable for the value of replacing any damaged items.
  • If a landlord does not protect a deposit by using a tenancy deposit protection scheme, or will not tell the tenant which scheme they are using, tenants can take them to court. The court will either order the landlord to pay back the deposit or to pay it into one of the schemes.  It will also order the landlord to pay the tenant three times the amount of the deposit as a fine. Tenants thinking about taking a landlord to court, should get advice, but be aware- a landlord forfeits all their rights if they do not use a tenancy deposit scheme.
  • If a deposit was paid before 6 April 2007 then the tenancy was renewed after that date, the legal situation is unclear. It is important, however, to remember that the new deposit laws were introduced to safeguard deposits, so the question must be asked - how are landlords safeguarding deposits taken pre - 6 April 2007?

  

2. Rent

  •  First months rent up front to move in.

If rent is to be paid monthly, tenants will usually have to pay for the first month before they move in. Tenants get a receipt to show the amount they have paid and check when their rent will next become due. Subsequent payments are usually made through standing orders, and late rent usually results in an interest charge for the tenant.

  • Rent arrears.

Rent is a priority. If you don't pay off your rent arrears and end up being evicted, you may find it difficult to find a new place to live. Your local council may not help you if you have been evicted because of rent arrears, even if you are homeless. Some councils may say you can´t go on the waiting list for a permanent home. Many private landlords ask for a reference from your last landlord and, may not rent to you if you've been evicted for rent arrears. See point 3 - rent arrears.

  • Withholding rent is very dangerous:

Tenants are legally obliged to pay rent up to the end of the tenancy and your landlord could take you to court to recover this money.

  • When financial disagreements arise with the landlord, get legal advice.

  

3.   Avoiding Eviction

  • If you do not pay your rent, the landlord has a legal right to ask a court to evict you.
  • If you have received a claim for possession and want to try and stay in your home then you must act quickly.
  • If you cannot afford to pay your rent because you have low income, you may be able to get some help with the payments by claiming housing benefit.
  • If you can afford to pay your rent and pay a little extra towards any arrears, you should talk to your landlord.
  • If you're having problems with your landlord and he/she doesn't want you to pay back the arrears but, insists you have to leave, get advice. You may still be able to stay.
  • Your landlord can give you notice to leave but, only the courts can make you leave (unless you live in your landlords home or you live in certain types of hostels.
  • The landlord may be willing to make an agreement with you and stop the court action. It is important that you make the agreed payments regularly.
  • If the landlord will not agree to accept your payments, you should reply to the claim and attend the court hearing.
  • If you can make a reasonable offer of payment, the court may accept it and allow you to stay in your home.
  • If the court does not agree to your offer, you will be given a date when you will have to leave your home. The costs of the court hearing will also be added to the rent that you owe the landlord.

 

4.  Issues out of your control 

a) No fuel supply to the property.

If the landlord is responsible for paying fuel bills but has not, tenants should contact:

  • Local Authority Environmental Health Dept. or Tenancy Relations Officer. If a utility service has been cut off due to the landlord, under The Local Government (Miscellaneous Provisions) Act 1976, a council can arrange to restore utility services for it's residents but only when young children or elderly people are affected.
  • The fuel company and ask them to transfer the account into your name so the bill is sent to you.

It is illegal for the landlord to cut off fuel in a rent dispute.

b) Mortgage lender is seeking repossession.

  • If the landlord has difficulty keeping up their mortgage repayments, it is possible that the mortgage lender can repossess the property. If a tenant believes this is a dangerous possibility, they should first speak to the landlord and if the landlord confirms that this is a possibility, the tenant should seek legal advice.

Where the tenant's landlord does not live in the property, the lender must inform the tenant that it is taking the landlord to court.