Rent 2 Rent, Management and Alternative Deposits

Published on Tuesday, 01 August 2023. Posted in Case Studies

This case concerned a hybrid rent to rent arrangement whereby the Agent became the primary tenant but was only required to install tenants and collect rent, with the Landlords managing the occupational tenancies.

The Complaint

Following the occupational tenants abandoning the tenancy two months early, the Landlords found that the property had become infested with cockroaches and other bugs resulting in items of furniture having to be destroyed. The Landlords also found evidence of multiple residents at the property none of which were the occupational tenants. Upon contacting the Agent to make a claim under the rent guarantee they also became aware that the Agent had entered into an alternative deposit arrangement that they were unaware of.

The Agent’s response was to offer the Landlords the balance of the alternative deposit (following a deduction for cleaning), a pro-rata refund of their fees and a received overpayment of rent – a total of £2,658.90. The Landlords’ refused the offer and escalated their case to the Ombudsman.


The Investigation

Regarding the condition of the property at the end of the tenancy, while the adjudicator had every sympathy with the condition the Landlords found the property in, the fact that they had chosen to manage the property themselves meant that this was not within the responsibility of the Agent. However, what also became apparent was that the Agent had not taken sufficient contact details from the Tenants as no email addresses or up to date mobile numbers were provided to the Landlords which had directly impacted their ability to arrange inspections.

Regarding the rent guarantee, the Agent had stated that their guarantee (the rent to rent arrangement) did not cover rent if the tenant was no longer in the property. As the Tenants had abandoned the property two months before the end of the tenancy and the Landlords had subsequently (and understandably) changed the locks, this had invalidated the rent guarantee. However, what was also apparent was that the actual terms and conditions of the rent guarantee were not made abundantly clear to the Landlords from the outset as they were not included in the documentation provided by the Agent and which they signed.

Finally, regarding the alternative deposit option, the terms of the agency agreement with the Landlords allowed the Agent the option to arrange deposits in this manner. This arrangement meant that in practice the Landlords had protection of up to five weeks rent which the Agent had offered them subject to deductions for cleaning. However, there was no evidence to show that the Agent had talked through the benefits and disadvantages of this option with the Landlords in accordance with their obligations under 13o of the TPO Lettings Code, before the Agent took up that option.

The Outcome

The adjudicator was critical of many aspects of the Agent’s communication with the Landlords and specifically the details in relation to deposits, rent guarantees and contact information, all of which were necessary for the Landlords to manage the Property. However, in the circumstances it was considered that the Agent’s offer of £2,658.90 was reasonable and represented a fair resolution to the shortcomings the Landlords had experienced. The Landlords were appreciative of the independent review and accepted the resolution.