I recently saw a post on social media, from a landlord asking the question
“Can my
letting agent deduct my 20% management fee from my tenants deposit, then ask me
to top up the deposit before I protect it”
After I had
returned from a lay down in a dark room, I started to consider the situation as
a whole and what was actually going on here.
So, lets
start with the facts
- · The
landlord entered a contract with the agent to find a tenant
- ·
It’s
a new let and the agent is charging the landlord for that service
- ·
The
landlord is legally obliged to pay for that service
- ·
The
tenant entered a tenancy agreement with the landlord to rent their property
- ·
The
agent has taken fees owed to them by the landlord from the tenants own money
- · The agent has told the landlord to top-up the tenants deposit
Agent & Landlord
Landlord
& Tenant
The
Agent-Landlord contract is a commercial or business2business agreement based on
the agent providing a service to their client landlord.
The
Landlord-tenant contract is a consumer agreement as the tenant is a customer of
the landlords.
Money paid
to the landlord as rent, is the landlords money, so the agent would be entitled
to deduct their fees from the first months rent for example.
The tenancy
security deposit however, is not the landlords money, it is the tenants money
at all times throughout the tenancy and remains so until the landlord can
provide reason why they wish to make a deduction from the tenants money for
damage/dilapidation or rent owed.
By the
agent deducting their fee directly from the tenants money they have actually
committed an illegal act called fraud by false representation.
This is
because they have deducted a fee owed to them by someone else from the tenant
who doesn’t owe them the fee.
What is
fraud by false representation?
Fraud by false representation is the act of dishonestly
making a false representation to make a gain or cause a loss for another
individual. As detailed by Section 2 of the Fraud Act 2006, fraud by false
representation must be the following:
- It
is a dishonest and false representation.
- It
is untrue or misleading.
- The
person making it believes that it is, or to some extent could be, untrue
or misleading.
Fraud by false representation focuses on the falsification
of any assets or money you claim to have. It is, in essence, the claiming of
something that you do not own, in an attempt to earn a financial gain.
The agent
in this case is on very thin ice indeed, as the act of fraud by false
representation is a criminal offence which holds a maximum sentence of 10 years
imprisonment and a fine. The Crown Court will deal with matters of this
severity. In minor cases, fraud convictions can lead to a smaller fine or
community orders.
Now,
deducting a fee owed to the agent by the landlord from the tenants deposit is
wrong but subsequently telling the landlord that they now have to top-up the
tenants own money before protecting the deposit is just outrageous.
The
security deposit is paid against damage/dilapidations and rent owed to the
landlord, why on earth would the landlord pay hi sown money to then eventually
pay himself for those wrongs.
Situations
like this should not occur, as self proclaimed property professionals, agents
should know at a very basic level that a tenancy deposit is a ring fenced fund
that is not available to them for their fees.
Personally the introduction of RoPA and the full
regulation of agents cannot come quick enough and I sincerely hope that it sees
agents such as this put out of business on day 1
