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Legal matters

Mumsnet has not checked the qualifications of anyone posting here. If you have any legal concerns we suggest you consult a solicitor.

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Original poster

Letting agent may be going out of business

25 replies

Tangfastics · 21/12/2019 13:20

I live abroad and rent out our house in the UK via a letting agent under a fully managed contract.

We contracted with this (new to us) agent and tenants in August 2019. The agent has consistently been late in paying the monthly rent to us and for the past week I have been unable to speak to anyone regarding this (it should be paid on the 5th of the month). I am worried they are experiencing cash flow issues.

The problem is this. The tenants negotiated a discount on their rent by paying a year up front to the agent.

If they are in fact going out of business, is there any pre-emptive action I can take to protect our and the tenants' money?

Many thanks for any advice anyone might be able to offer!

The agent is registered with the The Property Ombudsman if that helps at all.

OP posts:

IM0GEN · 21/12/2019 13:23

So why is the agent paying the rent to you monthly when they got a years payment up front ?

LazyDaisey · 21/12/2019 13:25

I’m not a solicitor but the tenant’s AST is with property’s owner not the agent. Similarly, your management contract is separately with the agent. How did tenants end up negotiating with agents about your rent?! Sounds like it’s the tenant’s problem if the agent goes bankrupt because they owe you money monthly as per the AST.

zebra22 · 21/12/2019 13:31

You should have received all the rent

Original poster

Tangfastics · 21/12/2019 13:44

The reason why the rent wasn't just passed through to us is because it's a fully managed contract so the agent need to able to deduct their fees and maintenance bills etc from the monthly amount owed to us.

OP posts:

AnchorDownDeepBreath · 21/12/2019 14:39

Usually they'd deduct the years worth of management fees from the years worth of rent and pay the difference to you, and you'd be responsible for paying any maintenance fees within the terms of the contract... in my experience, it's highly suspect that they've held onto the whole years rent and are dripping it to you monthly, and I'd be insisting on the remainder being paid now.

If they don't have it to pay back, you have the option of legal action - although that may be fruitless if the company is set up properly and they have no assets or cash - or you'd become a creditor.

Do you have anyone local who could go to the agents in person?

BritInUS1 · 21/12/2019 15:39

@AnchorDownDeepBreath exactly this

OP your set up is very unusual

Jon6b · 21/12/2019 16:08

Were you informed at any point the monies would be held in a designated client account?

Original poster

Tangfastics · 21/12/2019 20:47

No, we weren't informed that it would be held in any specially designated account.

I think we're going to struggle to get them to pay the remainder of the rent now even if all is well and I'm worrying about nothing.

I was just hoping to see if there was a way of heading off any potential issues now.

I will look again the the cancellation terms of my contract with them.

OP posts:

Jon6b · 22/12/2019 01:44

The tenants have paid the money due, and your issue is with the agent not the tenant. The agent is probably in breach of the code of guidance of residential lettings agents in that client money should be in a designated client account. Have you had a look on companies house to see if there is any info there on the agent, if it's a ltd co there may be some info re accounts etc. Have you tried contacting the agent at their home? Do you have the full names of the people you were dealing with? Do you have their bank account details. Have you followed their complaints process? What about their offices? Do they have a landlord there? You can carry out a land registry search for a couple of pounds. It might be worth doing that then contacting their landlord to see if they have any forwarding addresses. Do you have landlord's insurance if so it may be worth checking the terms? You may well just have to take the hit.

prh47bridge · 22/12/2019 08:43

How did tenants end up negotiating with agents about your rent?! Sounds like it’s the tenant’s problem if the agent goes bankrupt because they owe you money monthly as per the AST.

The agent acts on behalf of the landlord. The tenant is entitled to assume that the agent has the landlord's authority for anything they do on the landlord's behalf such as agreeing a discount for paying a year in advance. If the agent goes bankrupt that is the landlord's problem, not the tenant's. If the agent does go under the OP will not be able to pursue the tenant for the rent they have already paid to the agent.

informedisgood · 22/12/2019 16:23

Who protected the deposit? Very important because if agent failed to do so, it could cost you dear!
Check your paperwork regarding what scheme agent registered deposit with, then check that scheme to see if they actually did register it.
Penalties are high for not doing so and always falls back to the landlord, not the agent.

informedisgood · 22/12/2019 16:24

Also very suspect (and wrong) that they did not give you the year's rent minus their year's fees.

LazyDaisey · 23/12/2019 09:40

“If the agent goes bankrupt that is the landlord's problem, not the tenant's. If the agent does go under the OP will not be able to pursue the tenant for the rent they have already paid to the agent.”

The OP doesn’t state she agreed to those terms nor sign anything other than what is on the AST. Those are not the usual terms of the management contract she has with the agency so unless it specifically allows for this scenario in writing — how is this legally her problem?

Collaborate · 23/12/2019 10:51

The "agent" literally acts as the landlord's agent. that's the meaning of the word and that's how it works. they accept the money on behalf of the landlord. It is literally OP's problem and not the tenant's, who has a valid receipt for the rent they've paid.

AnchorDownDeepBreath · 23/12/2019 10:55

how is this legally her problem?

How is it not? If she didn't permit the agent, who is acting on her behalf, to collect rent annually - she'd need to pursue it against them. If she did, and they haven't passed on the funds and then cannot afford to, she needs to pursue it against them.

There is no way that this falls back to the tenant, who has paid for 12 months rent.

Dontdisturbmenow · 23/12/2019 15:30

This is why agents can be more trouble than worth. They are paid for services they don't deliver but worse, they don't take the fall for any of their error because in the law, the landlord is responsible for the actions of the agent towards the tenants.

Too many landlords make a big error is signing up with an agency assuming they know the law and can therefore be more trusted then themselves when all they are is an agent who fulfill they role best when told what to do, although that requires much education on rental law.

LazyDaisey · 23/12/2019 17:51

@AnchorDownDeepBreath and what if the OP decided to legally break the AST and evict tenant at 6 months plus a 2 month notice? Are you suggesting it’s her legal responsibility to pay back the tenant rent she never received? Or is it the agent that needs to pay back the rent? Because by your logic, the agent could refuse to pay back and the tenant uses the landlord for money. Then landlord sues agent.

LazyDaisey · 23/12/2019 17:52

Sues the landlord

Jon6b · 23/12/2019 23:01

and what if the OP decided to legally break the AST and evict tenant at 6 months plus a 2 month notice

Op has made no mention of any break clause so how can Op do this with no breach of tenancy? Firstly you cannot give a tenant effective notice during the fixed term unless there are rent arrears in which case it would be a notice to quit, which there is not, and secondly, even were there rent arrears Op cannot evict a tenant, only a court can issue a warrant of possession and the way the courts are stacked up this would take 5 or 6 months. And, I shall repeat, there are no grounds.

prh47bridge · 23/12/2019 23:52

what if the OP decided to legally break the AST and evict tenant at 6 months plus a 2 month notice? Are you suggesting it’s her legal responsibility to pay back the tenant rent she never received? Or is it the agent that needs to pay back the rent? Because by your logic, the agent could refuse to pay back and the tenant uses the landlord for money. Then landlord sues agent.

As Jon6b says, in this case there are no grounds. But let us imagine there were.

If the landlord evicts the tenant after the tenant has paid advanced rent to the agent it is absolutely the landlord's legal responsibility to refund the tenant even if they haven't received the money from the agent.

The tenant cannot sue the agent for return of the advance rent. They don't have a contract with the agent. Their contract is with the landlord. The agent received the advance rent on the landlord's behalf. The fact they haven't paid that money to the landlord is not the tenant's problem.

You are absolutely right. The tenant could sue the landlord if they refuse to return the advance rent. In this scenario there is no basis on which the agent could refuse to cough up but, if they did, the landlord would sue the agent.

The principles of agency are well established in law. The contract is between the principal (in this case the landlord) and the third party (the tenant). An agent cannot be sued on the contract by the third party because it is not their contract. As the agent is acting on the landlord's behalf, any money they receive from the tenant is treated as having been paid to the landlord as far as any legal action involving the tenant is concerned. The fact the money hasn't gone to the landlord is an issue between the landlord and the agent.

Original poster

Tangfastics · 26/12/2019 01:51

Sorry for not getting back to this sooner....Christmas and all that!

Just to say that I'm in no way blaming the tenant for this and I have no plans to try to evict them!

There is a break clause at 12 months (we signed 2 year fixed rent agreement) but it isn't relevant in this case as the tenants paid 12 months up front.

I'm just trying to figure out the best way to protect us (the landlords) and the totally innocent tenants from what seems to be an agent who is going tits up.

After much chasing they assured me yesterday the most recent monthly payment had been transferred. It hasn't.

OP posts:

Original poster

Tangfastics · 26/12/2019 01:54

Is there any way I can request the rest of the rent be paid now minus management fees?

I mean other than stating the obvious, is there a legal form of words I should be considering that might make them (the agent) take this a bit more seriously?

OP posts:

Original poster

Tangfastics · 26/12/2019 02:02

Just to answer another question - the deposit is properly protected.

OP posts:

Dontdisturbmenow · 26/12/2019 10:10

You need to look at your contract with the agency. Ultimately, they have held YOUR money from the rent, so of course you could ask for it all right away and you should do that asap. Then get free legal advice on how to take things forward threatening court if they don't transfer the money within the requested time.

FiddlesticksAkimbo · 02/01/2020 10:50

I suspect that given their reluctance even to pay you monthly, the only way you will get the annual lump sum from them is via the small-claims court. If they're struggling financially the usual principle is that whoever screams loudest gets paid first. It might be worth seeing if the threat and then the subsequent issuance of court proceedings gets you anywhere near the front of the queue. But if you're overseas you probably won't want to fly back and forth for court hearings.

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