Rental - Security Deposit

PompeyPete

Selling and then renting.

Put down a non-refundable security deposit on a rental property in good faith. We had little choice.
Our sale has just floundered despite us signing the contract as requested by our solicitor, and today finding out our buyers haven't even had a mortgage offer approved!

Questions:

Before inviting us to sign the sales contract shouldn't our solicitor have at least made sure that our buyers had a mortgage offer?

We still want the rental property we have paid a security deposit on. We haven't agreed a 'must have occupied by' date, so is our security deposit date open ended?

G_M

No. Not his business. He is getting things ready from your side for Exchange of Contracts, and part of that is getting your signature on the contract.

Until Exchange, it is always foolhardy to make major decisions that are dependant on the Exchange. There are 101 reasons why Exchange (and therefore Completion) might be delayed or cancelled.

As for your deposit, what does your agreement with the landlord say? If nothing, you'll have to speak to him to find out how long he is prepared to wait. Remember every week you delay costs him (several hundred pounds?) in lost rent which he'll never get back.

PompeyPete

Thanks. I'll rewrite the problem.
On Monday afternoon I get a phone call from our solicitor. He invites us into his office at 0930 to sign the contract.
We attend the appointment and sign. Our solicitor tells us that he expects to exchange either that afternoon, but more likely the following morning. We leave the meeting buoyant.
Nothing happens for 3 days, and suddenly we are told that for one reason or another they haven't even got a mortgage offer!!
Question: Should our solicitor have told us that exchange was imminent, without first confirming with our buyer's solicitor that they had at least received a mortgage offer?

Meanwhile, we had just been referenced by MARAS on a rental property.
Good rental properties fly off the shelf, and in order to reserve the property we needed to show good faith and put down the rental deposit. I had already posted the cheque (£795) to the letting agent, with a message requesting they hang on to the cheque for a few days until we'd exchanged with our buyer.
But as a result of what our solicitor had told us (ie exchange was imminent) I e-mailed the letting agent and told her to present our cheque. She told me she would have had to anyway in order to reserve the property.

We only viewed the rental property 8 days ago. We haven't signed anything with the landlord, or the letting agent.
Everything is being done at a distance (300 miles) by e-mail/phone.
We don't want to cause any problems, but then again we don't want to just throw away £795.
Questions: As we haven't signed any type of agreement is the security deposit a lost cause? We've paid the security deposit, and have therefore reserved the property. We've signed nothing to say that the deposit is valid for only a month (or whatever). So, where do we stand with having our deposit refunded?

PompeyPete

A few more words on this:
Our buyer will be homeless next Friday, as they have already exchanged on the sale of their house.
All they were doing, apparently, was porting their mortgage from their current property onto ours. They were downsizing, and I don't think they were after any additional funds.
Apparently, yesterday, they went into their mortgage company with all guns blazing demanding that their mortgage application be approved immediately. But they were disappointed (not the only ones!!).
The mortgage company is Cheltenham & Gloucester.

may_fair

PompeyPete wrote: »

We only viewed the rental property 8 days ago. We haven't signed anything with the landlord, or the letting agent.
Everything is being done at a distance (300 miles) by e-mail/phone.
We don't want to cause any problems, but then again we don't want to just throw away £795.
Questions: As we haven't signed any type of agreement is the security deposit a lost cause? We've paid the security deposit, and have therefore reserved the property. We've signed nothing to say that the deposit is valid for only a month (or whatever). So, where do we stand with having our deposit refunded?

Assuming this is a rental property in England/Wales, it's possible to have entered into a contract without actually signing a tenancy contract. It will depend on what you've agreed by phone/email - it's not clear whether the deposit paid was a holding deposit or whether it was a security deposit paid in respect of a tenancy.

Holding deposits are generally refundable. If, however, you've actually entered into a contract to rent the property, then you would be in breach of contract if you didn't proceed and the LL would be entitled to claim his losses from you as a result of the breach (but he has a duty to mitigate those losses).

I'm not sure that distance selling regs would apply if you met with the agent/LL at the viewing, but worth investigating if you didn't.

PompeyPete

may_fair
Thanks, that's very useful.
The news doesn't seem to get any better, and have been on the juice today.
I'll get the facts together in the morning, and refer back if I may.
Cheers!

G_M

Your solicitor may have been told by the buyer's solicitor that they were ready to exchange for all you know. The key point is, your solicitor did not tell you he had Exchanged, therefore you should not have assumed Exchange had ocurred.

I repeat my earlier point:

Until Exchange, it is always foolhardy to make major decisions that are dependant on the Exchange. There are 101 reasons why Exchange (and therefore Completion) might be delayed or cancelled.

PompeyPete

G_M
Thanks. I accept what you say, but...

To avoid becoming homeless we had to commit ourselves to renting the property up north. The only way we could do that was to pay a security deposit. The letting agent would not have been prepared to simply hold onto a bit of paper called a cheque. They needed the money in the bank in order for us to have shown faith.

At no stage were we informed by our solicitor that our buyers hadn't even got a mortgage offer. Surely that should be established by our solicitor [as part of his service] before he even thinks about inviting us to sign the contract, or leading us to believe that exchange is imminent.

PompeyPete

This is a sequence of events. I'd be very grateful for any further comments, particularly on whether we have a chance with the Distance Selling Regulations....

26 May
Estate Agent calls. Potential buyer who have a buyer themselves, and need to move fast. We are asked if we can reduce our asking price and be prepared move quickly. We agree, providing we are given enough time to travel north, view and accept somewhere to rent.

28 May to 1 June
Three viewings by the same people!

2 June
Receive written offer, which we accept.

3 June(ish)
Activate solicitor, and complete all the forms etc.

4 June – 11 June
Inform solicitor that we will be out of the area between 12-17 June, and only contactable by mobile.
Make travel and accommodation arrangements up north.
Trawl Rightmove for suitable properties, and arrange viewing appointments.
Arrange removal estimates.

8 June
Buyers standard mortgage survey completed. The surveyor told us his report would be completed and with the mortgage lender within 48 hours. I told our Estate Agent that the survey had taken place.

12 June – 17 June
Travel north, with half-a-dozen viewings booked. Most turn out to be very poor.

15 June
View suitable property. Letting Agent attends, but not Landlord.
Agree to accept the property subject to successful referencing.
Complete and pay for Referencing application.
I explain in detail our current position to the Letting Agent.

16 June
Collect by hand a letter of consideration, Subject to Contract. This letter breaks down the upfront charges. It mentions a Security Deposit of £795.
We receive a mobile call from our solicitor telling us that our buyer is being pressured by their buyer to exchange/complete. Can we make 24 June? The request is completely unreasonable, and “No” is our answer (there was no mention that our buyer hasn’t even got a mortgage offer yet!!).

17 June
Return down south. Find quite an important e-mail from our solicitor (see 4 June-12 June) dated 13 June. He should have phoned us!

20 June
We get phone call from solicitor asking inviting us to his office to sign the contract for our sale.
We receive e-mail from Letting Agent informing us that our referencing has been successful. We are asked to pay a non-refundable £695 Reservation Fee.
I send a cheque for £795 (see 16 June).

21 June
Meet with our solicitor at 0930. Sign contracts. He says that we might exchange that afternoon, but more than likely the following morning. He says he’ll phone us once the deal is done. Absolutely no mention that our buyer hasn’t had a mortgage offer yet!!

22 June
No phone call.
My wife goes to see Estate Agent to see if he knows anything. Several phone calls made, and she is told something along the lines of
PROBLEM! Our buyers mortgage offer has gone missing somewhere between Cheltenham & Gloucester and our buyers solicitor. All our buyers are doing is 'transporting' the mortgage on their current property. There's no complications, it's been approved, but not arrived yet.
The Estate Agent tells my wife that he’ll keep us informed.
I send an e-mail to the Letting Agent informing them there is a problem, which is in hand.

23 June
Estate Agent tells us that our buyer is going to see their mortgage provider (C&G) on Friday morning.

24 June
Nothing!
We go to see the Estate Agent mid-afternoon. Total shock. Our buyer has been to C&G, all guns blazing. No mortgage offer, no explanation.
Our buyer has exchanged with their buyer, they complete on 1 July, and unless they can sort out something pdq will become homeless.

The good news is they still want to buy our house!!!

We’re staggered with the way things have panned out, and a complete balls-up by people we pay well comes to mind.
My immediate interest now is can I salvage any of the Reservation Fee (Security deposit) of £795? Can I use the Distance Selling Regulations.

G_M

Most of what you you say is typical of a sale/purchase. There are always 'unexpected' things that happen, 'unexpected' delays. It's not described as the most stressful process after marriage/divorce for nothing!

The only really relevant part of your diary is:

He says that we might exchange that afternoon, but more than likely the following morning. He says he’ll phone us once the deal is done.

followed by:

No phone call.

That tells you all you need to know.

PompeyPete

No it doesn't.
I've got a conveyancing chart guide in front of me, issued by our solicitor, to help us to a smooth move! (That's what the chart boasts!!).
There are three columns, one for the seller, one for the buyer, and an action column for all parties concerned.
The columns are set in a chronological/logical order.
Before the seller signs the Contract, the buyer must be able to comply with mortgage conditions, and may need to negotiate via the Estate Agent for works required by survey. That to me means that the buyer has received a mortgage offer.

That last sentence is the crux.
There must have been a mortgage offer (with or without conditions) before the seller is invited to sign the Contract.

G_M, much as I'm grateful for your remarks, I think you are trying to defend the indefensible.