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Question Title: Agent sued over deposit
| Question: 297 |
| We are involved in a court case and I am wondering if you can give me some further assistance. Essentially the dispute is over the return of a deposit of £700 to a tenant following the conclusion of a tenancy. The tenant had done considerable damage to the property during the tenancy, but refused to accept that the cost of damages should be deducted from the deposit. In an effort to obtain the entire deposit, she submitted a small claim against us.
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| Answer: |
| As a general rule, any contract made by an agent with the authority of his principal (i.e. the landlord) may be enforced by or against the principal where his name or existence was disclosed to the other contracting party at the time when the contract was made. (Skinner v Stocks, 1821). The issue becomes more complex when it concerns the deposit as it will depend on the capacity in which the agent is holding the deposit. If the agent holds the deposit as 'agent for the landlord', then the agent is obliged to accept all instructions regarding the deposit from his principal, the landlord, and so again, it can be argued that the ex-tenant is bringing the action against the wrong party and you, as agent, should apply to have the case dismissed on this basis. If, however, the agent accepted the deposit as stakeholder (or did not disclose how the deposit was accepted on the receipt for the deposit) and the tenancy agreement makes no provision for how the deposit may be used (for example, to pay for any damages, dilapidations, rent arrears or any other costs arising from a breach of the terms of the tenancy) then the money belongs to the tenant and is returnable to him at the end of the tenancy. If the agent appropriates the deposit to pay for damage, then he does so without explicit authority and is therefore liable to legal action from the tenant as a result (in such cases, the tenant is entitled to have the agent's decision reviewed in the courts). For this reason, many agents opt to hold deposit monies 'as agent for landlord' thus removing the subsequent risk of being drawn into litigation over deposit disputes. See our article in LUJ April 2002, p18 for more information on deposits and deposit disputes.
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References:
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Hyperlinks:
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Letting Update Journal |
April 2002 page 18 |
letting-update-journal.html
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Letting Handbook |
Chapter 10 |
letting-handbook-and-factsheets.html
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For more information, discuss on the Forum
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