Monday, May 12, 2008

Agents letting property subject to a re-possession order

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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There is quite a lot of discussion about tenants evicted unfairly by landlords in retaliation for something that they have done, such as complain about repairs. However there is another type of unfair eviction where tenants do not even get the benefit of the two months notice under section 21 which tenants receive in a retaliatory eviction. I am talking about tenants who get evicted by the landlords mortgage company when the landlord fails to meet his mortgage payments.

I was consulted by tenants on one of these cases recently. They had rented what they believed to be their dream home, only to find two months later, the bailiffs at the door. It was a complete surprise to them because the possession order had been obtained before the property had been let to them!

Yes, amazing though it seems, the possession order was made several weeks before the tenancy was granted, and the date for possession in the order had actually expired the day before my clients tenancy started (by the way they know I writing this and have given their consent). Therefore the notice which mortgagees are required to serve on occupiers of properties did not help them, as it had been served over six months ago!

The property was rented via an agency and the question comes to mind – what is the agents obligation here? Under agency law an agent is generally not liable for the acts or omissions of its principal. However what if the property they are presenting to the public as a suitable home, is one which is vulnerable to repossession from the moment the ink dries on the tenancy agreement?

I had a word with one of my letting agent clients about the sort of checks that are generally done in the business against their landlord clients and the properties they take on. It seems that the answer is ‘not much’ Apparently landlords are sometimes asked to sign a form saying that they are authorised to let the property and that there are no legal problems or other problems with it. Well that’s not much good is it? A dishonest landlord is going to sign that without a qualm.

I can’t help feeling that there should be some sort of obligation on agents to check this sort of thing. After all in this case the agent was offering to let through its business, a property which had a substantial defect – i.e. it was vulnerable to repossession at any moment. It seems wrong for the agent to be able to pocket its commission (taken from my clients rent) and then say “sorry gov, nothing to do with me”. Which is in effect what they are doing.

What do other people think?

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5 comments:

Nearly Legal said...

Ouch - although there will be more of this going on shortly.

As to the duty of the managing agent, I would guess this is always going to be tricky as long as they are simply the landlord's agent. The argument will always be that the tenant has recourse against the landlord.

Anything else would probably require legislation to introduce a parallel duty to the tenant to ensure that the let is 'proper'. I can hear the lobbying already...

I'll add a link to your post - repossession has been getting a lot of comments on NL today and this is an important part of it.

Anonymous said...

I let out a house, and I haven't got a buy to let mortgage which means I'm in breach of my mortgage terms. This could be a very bad thing for my tenants, but I don't feel I've an alternative. To convert my existing mortgage to buy to let would cost:
- £250 fee by my lender to convert the mortgage and approve the tenancy agreement
- 0.25% interest increase
- around 8% of my rental income to use a lettings agent as the lender stipulates I must.
In my case this means the income would barely keep pace with the interest on the mortgage. So I wouldn't do it, and the tenants there now wouldn't have had the chance to live there. Given that I *know* I will always be able to meet the monthly repayments, I'm not sure who's harmed.

Views?!

House said...

As long as the mortgage is paid I've never seen a mortgage company do anything just because you've got a tenant in. In the current economic climate I'm sure they're thankful for the fact they are being paid at all!

I think what your doing is fine really, certainly nothing compared to LL's reletting with possession orders which is terrible. Sadly hard to do anything about it as they probably don't have any money to pay any breach of quiet enjoyment action.

J said...

Well, your tenants surely have a cause of action against their landlord (derogation from grant / breach of the covenant for quiet enjoyment etc) and, whilst general damages wouldn't be very high, the aggravated / exemplary damages would be more significant.

As for the agents - what duties do they owe a tenant though? Their fiduciary duties are to the landlord. I suppose that, if they knew of the possession order, you'd have a remedy against them for misrepresentation.

Net said...

I agree that estate agents should do more checks to protect tenants. i rent a house which i have found out my landlord doesnt even actually own the house! And the morgage is going unpaid. its 2 weeks before xmas and i am looking for somewhere new to live before i get evicted! merry christmas ay?!