Is the letting agent right in saying this?

SashikoStitcher

Tenant signed an AST and paid the deposit and first month rent 2 days before move-in date.
Tenant pulled out before collecting the keys and now wants all the money back. The terms of the lease were 12 months with a break clause after 6 months. My letting agent says we can't withhold the deposit because:

"unless possession is given, which by definition of UK [sic] law would mean that they collected the keys, the tenancy has not commenced"

My take is that they committed to the tenancy by the signing the agreement but have terminated without notice on day 1 giving me the right to withhold the deposit, and arguably the rent as well.

Does anyone have any idea where this concept of collecting the keys triggering the obligation comes from?

Thanks.

need_an_answer

Did the agent collect a holding deposit that was equivalent to 1 weeks rent?

my understanding is that the holding deposit can be retained but the rent and deposit relating to the property should be returned as tenancy had not commenced

Why was the tenancy agreement signed prior to the keys being given out?

In normal circumstances the agreement is signed and keys issued on that date

Were funds awaiting clearance?

G_M

The agent is right that no tenancy was created as the applicant did not take occupation.

But a contract was created, and the applicant has breached the terms of that contract. The landlord can claim his consequential losses for that breach.

Any holding deposit is clearly forfeited.

The security deposit is more tricky.

1) as a security deposit, it has to be either registered in a scheme within 30 days or returned. Retaining it risks the tenant claiming the penalty!

2) The contract probably specifies what it can be used for. Rent arrears is probably a specified use, but I'm unsure rent is owed. There is no tenancy, so no rent is owed. What is owed (as I said above) is (I think!) the consequential loss from the contract breach. A subtle difference.

So it might be advisable to return the security deposit.

As for the first months rent, I would retain that, with a covering letter to explain that it covers the consequential loss resulting from the breach. If the applicant is unhappy, they can sue the LL for its return and let a court decide. I doubt the 'tenant' would do that, and if they did, I doubt the court would find in the tenant's favour. But you never know......

SashikoStitcher

@need an answer

Why was the tenancy agreement signed prior to the keys being given out?In normal circumstances the agreement is signed and keys issued on that date

Really? the AST text clearly talks about obligations (eg to pay the deposit) that become operative on signing, then it gives a date from which the tenant can move in. Why would it be standard practice only to sign on the day you move in? You want everything agreed before move-in date, surely?

G-M

The agent is right that no tenancy was created as the applicant did not take occupation...There is no tenancy, so no rent is owed..

I agree with you re the contract.Can you explain the legal basis for tenancy not being created until tenant given keys and why this is necessary to trigger an obligation to pay rent? We made the keys available to them on the agreed date.

G_M

a quick duckduckgo (or google):


https://forums.landlordzone.co.uk/forum/residential-letting-questions/69786-does-a-tenancy-starts-from-signing-date-or-moving-in-date

Why was the tenancy agreement signed prior to the keys being given out?

I agree it is common for a TA to be signed in advance of the move in date and hence in advance of the keys being handed over. That gives both LL and tenant confidence ahead of time that a contract exists and that each side is legally commited tothe future tenancy. As here.


And it gives each side the opportunity to claim legal damages if the other side reneges on the contract. As here.

theartfullodger

SashikoStitcher wrote: »

..............Can you explain the legal basis for tenancy not being created until tenant given keys and why this is necessary to trigger an obligation to pay rent? We made the keys available to them on the agreed date.

It's not when tenant is given keys but when tenant takes up occupation: See section 54(2)) LPA 1925


http://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/54


& this discussion...
https://forums.landlordzone.co.uk/forum/residential-letting-questions/69786-does-a-tenancy-starts-from-signing-date-or-moving-in-date


NB. A small minor example of why landlord/tenant law is not simple or easy to get right...

need_an_answer

how far in advance then would a tenant sign the agreement?

just curious...

I must like living on a knife edge...my agent gets the tenant in on the pre set arranged day,signs and issues the keys.

Apologies, I thought that's what happened with all tenancies.

AdrianC

What are you actually hoping to get out of this? 6mo rent from the tenant, in return for not actually having to provide them accommodation? Ain't going to happen.

How much is your actual loss here? If the tenant had not signed the tenancy, and simply pulled out at that point then how much better off would you be, compared to them pulling out a couple of days later? That's the extent of your loss, so what you're entitled to reclaim from them.

G_M

It can be issue.

If there is an existing tenancy, with a tenant still in occupation, a LL would be unwise to sign a new TA with a new tenant just because the existing tenant had served notice or their tenancy was ending. That current tenant might change their mind and not move out, leaving the LL in breach of contract with the new incoming tenant.

Hence what you describe - many LLs/agents sign the new TA only when the property has become vacant, and in practice if the new tenancy is to start immediately that means the TA is signed and keys handed over same day.

But that does mean that either side can back out and that leaves the new tenant vulnerable and potentially homeless.

But if, for example, the property is empty, and/or being redecorated, there is nolegalobjection to signing in advance so that each side is assured of the other's commitment.


Sometimes a tenant might want to plan ahead (eg their current tenancy ends next month). The LL is prepared to wait for that tenant (despite their property being empty), so they sign a future-dated TA and both are happy and legally committed.

SashikoStitcher

AdrianC

What are you actually hoping to get out of this? 6mo rent from the tenant, in return for not actually having to provide them accommodation? Ain't going to happen.

How much is your actual loss here? If the tenant had not signed the tenancy, and simply pulled out at that point then how much better off would you be, compared to them pulling out a couple of days later? That's the extent of your loss, so what you're entitled to reclaim from them.

No, I don't expect to get 6 months rent from them. However I have monies in hand and I am concerned that my letting agent will pay them back out because he doesn't fully understand my legal rights.

The theoretical situation of what would have happened had the tenant not signed the contract is irrelevant.

My losses are the rent I would have got on the property up to the date on which a replacement tenant moves in, plus the costs of setting up the new tenancy such as reference checks, contract preparation fee charged by agent etc.

I have an obligation to mitigate my losses by finding a new tenant asap.

need_an_answer

Thanks GM...I have a clear void between tenants, hence sign on the day...wouldn't ever go for one out one in with no void overlap.

anyway back to topic...