Prioritising expenses and arrears on tenant deposit and disputes

haveabreak

Hello

My tenant is soon to be evicted via section 21 accelerated (bailiff appointment confirmed). They paid a deposit of £1500 which I registered with the DPS under the insured scheme.

The tenant is almost £7500 in rental arrears, so unlikely to get deposit back in any case. I will likely put in a money claim to try to get the remaining arrears back.

Tenant has unpaid utility bills of £200 which I would normally look to deduct from deposit. 
After the eviction I will have the inventory clerk do a check out. If there is any damage/ items missing (say £500 worth, for example). I would normally look to deduct this expense from the deposit after negotiating with tenant. 

My question is should reduce the rental arrears by the amount remaining (after I deduct the proposed expense of £700) from the deposit. I.e. rental arrears becomes 7500 - (1500 - 700) =£6700?

If there is a dispute on the proposed expenses to be held back from the deposit, I understand the tenant can raise the dispute with the DPS. I have not been through this process before and am not sure how long it will take.

My concern is that, according to my example calc above, I need to settle the deposit first to arrive at the final rental arrears amount (so that I can then start the next process of the money claim for rental arrears).

Can someone please advise if my thinking above is correct or not, and if this is the right approach.

Thanks.

Edit1: Some utilities are paid by me via management charge. So I invoice the tenant annually.

Edit2: Mutually agreed with tenant (as have done with all prior tenants) via email in 31/03/22 to end tenancy on 31/05/22. Tenant came back 2 weeks prior to end date stating they need section 21 for rehousing by council. Had already done viewings and found new tenants to move in 01/06/22. Served section 21, encouraged existing tenant but did not vacate. Ended up cancelling new tenants contract (which was £150pm higher rent than current) and paying a letting agent cancelling fee of £1000. Can I claim £1000 breach of contract and/or loss of higher rent with MCOL?

anselld

I would deduct the rent arrears from the deposit first as they cannot really be disputed.  Do not deduct utility bills, they are between the Utility Co and the tenant to resolve.  Then claim everything else via mcol.

propertyrental

Whose name are the utilities in? Yours? If so, why have you not been paying them? Tenants? Then not your concern.

You could refuse to use the DPS dispute process and claim the whole lot via Moneyclaim online.

saajan_12

haveabreak said:

Hello

My tenant is soon to be evicted via section 21 accelerated. They paid a deposit of £1500 which I registered with the DPS under the insured scheme.

The tenant is almost £7500 in rental arrears, so unlikely to get deposit back in any case. I will likely put in a money claim to try to get the remaining arrears back. - ouch, that's ~5 months (assuming a months deposit)! How soon is 'soon to be evicted' as a Section 8 may have been faster.. 

Tenant has unpaid utility bills of £200 which I would normally look to deduct from deposit. - is that on the tenant's own account with the utility provider, or do they pay you the utilities? If the former, then that's a contract between the tenant and utility co so you can't deduct the £200.. Just make sure you have the tenancy end date and meter readings to prove to the company for when you take over responsibility. 
After the eviction I will have the inventory clerk do a check out. If there is any damage/ items missing (say £500 worth, for example). I would normally look to deduct this expense from the deposit after negotiating with tenant.  - correct, try negotiating but if they don't play ball, then just claim whatever you can prove from the deposit / MCOL. 

My question is should reduce the rental arrears by the amount remaining (after I deduct the proposed expense of £700) from the deposit. I.e. rental arrears becomes 7500 - (1500 - 700) =£6700? - doesn't really matter.. your total arrears + damages exceeds the deposit, so you'd be claiming the full deposit. As for reason, easiest would be to show the arrears as that'll probably be more clear cut, but doesn't really matter. 

If there is a dispute on the proposed expenses to be held back from the deposit, I understand the tenant can raise the dispute with the DPS. I have not been through this process before and am not sure how long it will take.

My concern is that, according to my example calc above, I need to settle the deposit first to arrive at the final rental arrears amount (so that I can then start the next process of the money claim for rental arrears). - not really.. you'd make one MCOL claim for overall losses under the tenancy including arrears + property damage less deposit. Whatever you claim against the deposit (ie 1500 of your total losses) would already be adjudicated there, so you still just claim the rest ie 7500 + 500 - 1500 = 6500 through MCOL.

Can someone please advise if my thinking above is correct or not, and if this is the right approach.

Thanks.

No need to wait, your total losses are £7500 arrears + £500 property damages. Claim £1500 of it against the deposit and raise a MCOL for the remaining £6500. 

The rental arrears are probably more of a sure thing, so would claim that against the deposit as you already have that while with the MCOL you still have to actually recover the money once you get a CCJ. 

haveabreak

anselld said:

I would deduct the rent arrears from the deposit first as they cannot really be disputed.  Do not deduct utility bills, they are between the Utility Co and the tenant to resolve.  Then claim everything else via mcol.

To clarify some utility is paid by me via management charge. So I invoice tenant annually on this. I have made the edit on original post. 

Would you still recommend deducting arrears first? What about property damage and utility?

theartfullodger

You THINK they will be evicted.  Wait and see what happens .

What stage are you at - notice served, expired, court considering, PO granted, PI expired, bailiffs booked.... Please

haveabreak

theartfullodger said:

You THINK they will be evicted.  Wait and see what happens .

What stage are you at - notice served, expired, court considering, PO granted, PI expired, bailiffs booked.... Please

The bailiff eviction will be in a few days.

haveabreak

saajan_12 said:

No need to wait, your total losses are £7500 arrears + £500 property damages. Claim £1500 of it against the deposit and raise a MCOL for the remaining £6500. 

The rental arrears are probably more of a sure thing, so would claim that against the deposit as you already have that while with the MCOL you still have to actually recover the money once you get a CCJ. 

Thanks for your informative reply. Some questions:

1. Should I claim the utility from the deposit also as a sure thing? Aa mentioned on the edit, i pay some utility by management charge and invoice the tenant annualy. Tenant has been sent two invoices  (so 2 year worth) which have been unpaid.

2. Mutually agreed with tenant (as have done with all prior tenants) via email in 31/03/22 to end tenancy on 31/05/22. Tenant came back 2 weeks prior to end date stating they need section 21 for rehousing by council. Had already done viewings and found new tenants to move in 01/06/22. Served section 21, encouraged existing tenant but did not vacate. Ended up cancelling new tenants contract (which was £150pm higher rent than current) and paying a letting agent cancelling fee of £1000. Can I claim £1000 breach of contract and/or loss of higher rent with MCOL? 

anselld

You cannot claim for loss of the 150 rent increase nor the 1000 cancellation fees.  Those are entirely down to you.  The existing tenancy has not ended.  It was premature to attempt to re-let.

theartfullodger

Getting court judgement is the easy bit.  Collecting the ££££ much harder.

Why did you permit them to rack up so much arrears?  

Was eviction s8 (arrears) or s21  (no reason at all, no fault)?

What references did you provide please?

saajan_12

haveabreak said:

saajan_12 said:

No need to wait, your total losses are £7500 arrears + £500 property damages. Claim £1500 of it against the deposit and raise a MCOL for the remaining £6500. 

The rental arrears are probably more of a sure thing, so would claim that against the deposit as you already have that while with the MCOL you still have to actually recover the money once you get a CCJ. 

Thanks for your informative reply. Some questions:

1. Should I claim the utility from the deposit also as a sure thing? Aa mentioned on the edit, i pay some utility by management charge and invoice the tenant annualy. Tenant has been sent two invoices  (so 2 year worth) which have been unpaid. - depends on whether the utility really is a sure thing (typically aren't, so hopefully the adjudicator doesn't jump to conclusions). Does your contract specify this should be reimbursed to you? 
Whats wrong with just keeping it simple and claiming the arrears here?

2. Mutually agreed with tenant (as have done with all prior tenants) via email in 31/03/22 to end tenancy on 31/05/22. - what exactly did the agreement say, and was it in writing? 
Tenant came back 2 weeks prior to end date stating they need section 21 for rehousing by council. Had already done viewings and found new tenants to move in 01/06/22. Served section 21, encouraged existing tenant but did not vacate. Ended up cancelling new tenants contract (which was £150pm higher rent than current) - okay, so your losses are the £150pm between 1/6/22 and when the old tenants move out, plus your reletting costs, plus court costs for the eviction, plus any successful claim that your proposed new tenants make for you cancelling their contract. 
and paying a letting agent cancelling fee of £1000. - was the £1000 negotiated after the fact, or did you have to pay that? Was that just for the agent or going to the new tenants to get them to cancel the contract? The issue will be if this was a voluntary payment when you are supposed to mitigate your costs. 
Can I claim £1000 breach of contract and/or loss of higher rent with MCOL? 

The key questions are
1) did you have a binding early surrender agreement with the old tenants to vacate by May, in the same formality as the original tenancy etc?
2) If yes, then the next question is did you agree to cancel it 2 weeks before? (as they could argue had you not said you'd do the S21 to help their council case, they would have figured out how to move out and not incurred all the costs). 

If yes and no respectively, then you may have a contract breach to vacate by 31 May, and may be able to claim the resulting damages:
- court costs for the eviction
- £150pm between 1/6/22 and when the old tenants actually move out
- reletting costs (to re-advertise, re-reference, etc)
- new tenants' claim because you cancelled their contract (if successful, since you have to mitigate costs). 
However not a guarantee, you could try to claim these via a MCOL. However the issue is still whether you actually recover anything if they don't willingly pay.