Here is a question to the Blog Clinic Fast Track from Rachel (not her real name) who is a tenant.

The concise question is:

At the end of an AST contract, can the Landlord simultaneously undertake (a) a tenant swap and (b) a contract extension against the written wishes of majority of the outgoing Tenants, and retain the deposit?

The context:

We are four tenants sharing a four bedroom flat. All four names are on the contract. We had a one year AST contract, under English & Welsh law. Towards the end of the contract, three of the flatmates decided that they would move out at the end of the contract and therefore not renew the contract. One flatmate decided she wanted to stay and find replacements for three outgoing tenants.

The three tenants wrote to the landlord stating that they would not renew, that the contract would terminate at the end of its term, and that the tenants would be released from any obligations after the end of the contract term, and that they expected the deposit to be released.

Separately, the one flatmate who wanted to stay found three replacements. The landlord then signed a contract with that tenant, plus the three new tenants.

Now the landlord is refusing to release the deposit to the outgoing flatmates, and telling the outgoing flatmates that it is their responsibility to organise a deposit transfer from the new tenants to the outgoing ones. There is a clause in the new contract saying that costs for any damages must be agreed with the outgoing flatmates.

Whilst we understand that this might be the case for a tenant swap during the term of the contract, we do not believe that this should be the case at the end of a contract term.

The tenant who is staying has a history of not paying bills, and when a tenant swap was performed during the last contract, this tenant asked the incoming tenant to transfer the deposit to her, but never transferred it back to the outgoing tenant. She has done the same thing with the incoming tenants. We (the outgoing tenants) are therefore worried that we will not get our deposits back.

Answer

I can see several issues here. First of all – there is no such thing legally as a ‘tenant swap’.

In law, the only way an individual tenant in a joint tenancy can be changed is by creating a new tenancy with the remaining and incoming tenants.

This is the case whether the change takes place mid-term (in which case the original tenancy will need to end early) or when a new tenancy is given at the end of the fixed term.  The reason for this is down to the legal rules that apply when people own a tenancy jointly.

To avoid confusion, in this answer I will call the original tenancy, ‘Tenancy 1’ and the replacement tenancy ‘Tenancy 2’.

Let’s take a look first at the law and

How a deposit should be dealt with

All deposits need to be protected in a government authorised tenancy deposit scheme within 30 days of the deposit money being paid to the landlord or his agent.  In addition, prescribed information must served on the tenants, also within the 30 days.

When a tenancy comes to an end, if one or more of the tenants are leaving, the deposit will need to be dealt with.

The proper procedure is for a new inventory to be prepared, any deductions made for damage done during Tenancy 1 (as it would be unfair for incoming tenants to be held responsible for this), and the balance of the deposit returned to the tenants of the Tenancy 1 – maybe retaining the remaining tenants portion The incoming tenants for Tenancy 2 will then need to pay the rest of the deposit amount to the landlord.

The deposit for Tenancy 2 will then need to be protected in a tenancy deposit scheme – within 30 days of receipt of the money – and the prescribed information served on the tenants.

Problems in your case

I think the first thing you need to do is check whether your deposit for Tenancy 1 has been properly protected in a scheme.  Click here for a page (on the Shelter website) with links to all three schemes where you can do this.

If the deposit for Tenancy 1 was protected then you need to contact the scheme and ask their advice. It should be possible to get the money released to you.

If your deposit hasn’t been protected – then, strictly speaking, you will be entitled to bring a claim against the landlord at court for

• the return of your full deposit and
• a penalty of up to 3x the deposit sum

However, from your question, it looks as if one or more of you may not have paid the deposit money to the landlord but to the remaining tenant. In that case – will the landlord be responsible for dealing with it?

It’s a moot point and I am not sure I know the answer.

It is arguable that if a landlord tells incoming tenants to pay the deposit money to one of the other tenants, that tenant could be deemed to be the landlord’s agent for that purpose.

In which case the landlord would be deemed to be responsible for the deposit money (in the same way they are if the money is paid to a letting agent), and a claim could be brought against him under the deposit legislation.

If not, then as the landlord never had the money, he cannot be held responsible for it.  Any claim will have to be made against the tenant it was paid to.

It is clear however that your landlord is not complying properly with the deposit legislation. I suspect that if a Court claim were brought against the landlord under the deposit regulations, the Judge would be on your side.

If the landlord continues to refuse to refund the deposit money, then I suggest you speak to a company which specialises in acting for tenants on deposit claims. Some of them, for example,  this company, will act on a no win no fee basis.

Bringing a claim – the claimants

Note that there will be a problem in bringing court proceedings in your case, as there is a rule that all the joint tenants of a tenancy need to bring the claim together. Which would mean all the tenants in Tenancy 1.

As one of the tenants in Tenancy 1 is remaining at the property she will probably be unwilling to do this – particularly if she was the person you paid your share of the deposit to.

The problem could, I understand, be resolved by applying to the court for an order under the Civil Procedure Rule 19.3, and it may be necessary to make the dissenting tenant a defendant to the claim. You would have to see whether the no win no fee company were willing to act in these circumstances.

Your concise question

This is not actually the issue in your case. If a new tenancy agreement has already been signed then this will have the effect of cancelling the original tenancy – so the landlord is not extending the original contract.

The question is really, who was the deposit paid to and was it properly protected? Then, if it was not protected, will you will be able to bring a claim against your landlord for the penalty?

Conclusion

This is a very unfair situation. You have paid a deposit in good faith but it is possible you may not be able to recover it, or the penalty which Parliament provided to tenants for this situation.

If your landlord had used a letting agent, you would have been able to bring a claim against their Property Redress Scheme. However, as you dealt directly with the landlord this is not available to you.

Which is one reason why some kind of redress scheme covering landlords (as proposed by the Government) would be a good idea.

In order to protect their position, I would recommend that tenants NEVER pay their deposit money to another tenant. It should always be paid either to the landlord or to a letting agent.

You should also check, at least two months before you are due to move out, to see if your deposit has been protected (which you can do via this page).

If the deposit has not been protected, and particularly if one of your co-tenants is remaining in the property – you may want to consider deducting your share of the deposit from your final month’s rent.

As it is likely that otherwise, you may never get it back. Or not without a great deal of trouble.