Guaranteed Rent

Published on Tuesday, 26 February 2013. Posted in Case Studies


Following the end of the tenancy and the tenancy deposit scheme awarding the full amount of the deposit to Mrs I (the landlord) in respect of damage caused to the property, she raised 21 different complaints concerning the Agent’s conduct which she asserted had contributed to the problems arising. Mrs I’s central claims were that the tenant found by the Agent was unsuitable for the property, that they failed to undertake proper references and that they did not carry out inspections during the tenancy which would have alerted her to the problems sooner. The Agent’s response was that they had obtained acceptable references, that they were not responsible for the tenant’s behaviour and that they were, therefore, not liable for the balance of the costs not settled by the security deposit.


My examination of the Agent’s file found that they had formally agreed to rent the property from Mrs I as the tenant and put in place a sub-tenant. The sub-tenancy agreement recorded the Agent as the landlord, however, the head-lease (with Mrs I) contained clauses whereby the Agent sought to remove liability from themselves in respect of the sub-tenant’s performance under the sub-tenancy agreement. I also found that the Agent had carried out references which the sub-tenant had failed due to no discernible source of income, but had obtained a guarantor. I was presented with no evidence to indicate that detailed advice concerning the referencing results had been passed to Mrs I and that her permission to progress the sub-tenancy to that tenant had been sought. I did, however, note that the Agent had served a number of notices on the subtenant which recorded them as the landlord.


I pointed out to the Agent that if they wished to put in place a tenant who had failed prudent referencing criteria and agree arrangements in which they intended to remove liability from them in respect of that tenant’s performance under a sub-tenancy agreement that Mrs I was not party to, then they should have provided Mrs I with detailed commentary of the referencing results (of the sub-tenant and guarantor) and sought her written approval before agreeing any tenancy agreement with the subtenant. To not do so was neither fair nor reasonable, regardless of whether a guarantor had been obtained. Given that the Agent further complicated matters by issuing notices to the sub-tenant recording themselves as the landlord, I supported the complaint and made a total award of £4,087.31 which included the balance of the outstanding costs relating to the damage to the property along with an award for avoidable distress, aggravation and inconvenience in relation to six of the eight complaints I supported. I also advised the Agent that is was their decision whether to continue their pursuit of the sub-tenant and guarantor to reclaim these monies under the terms of the sub-tenancy agreement.



If an agent is to rent the property from a landlord, become the tenant and sub-let at a higher rent for commercial gain (i.e. set up a guaranteed rent arrangement), then it is imply neither fair nor reasonable to include clauses within agreements which absolve the agent of any liability relating to the sub-tenant’s performance without the client landlord’s permission being sought following full disclosure of the sub-tenant’s references.