Can an agent withhold part payment of 6 months rent in advance?

Yes – If the terms of the agency/client agreement allow the agent to retain certain monies received on behalf of the principal (landlord) it is acceptable for the agent to do so consistent with the terms of the agency/client agreement.

If the agency/client agreement does not allow the agent to withhold rent paid in advance then the agent should not do so….

The agency agreement (the contract) is governed by a fiduciary duty which the agent owes to the landlord. A fiduciary duty is a very stringent duty and Bristol and West Building Society v Mothew [1996] EWCA Civ 533 is a leading English fiduciary law that is globally cited for its definition of a fiduciary. In the landmark case Lord Milllett said a fiduciary is someone who is undertaken to act on behalf of another the circumstances of which give rise to a relationship of trust and confidence. As the fiduciary, the agent has the highest duty of care, higher than any contractual duty, because it is a fiduciary duty. The agent must be loyal to the principal, not put his own interest first and not profit from his fiduciary position unless the principal consents. Breach of a fiduciary duty is considered a fundamental breach and would allow the landlord to terminate the contract without notice. Specific examples:

* Agent must not delegate from his office – the agent cannot get someone else to do what he is contracted to do

* Agent cannot accept bribes – e.g. From prospective tenants

* Agent must not make a secret profit – e.g. From contractors employed to undertake work on behalf of the landlord by way of inflated invoices or paying commission to contractors

What does the fiduciary duty have to do with the payment of advance rent? I would suggest that as part of an agents ‘highest duty of care’ they should pay the landlord monies the agent receives on their behalf as soon as possible after the agent receives them minus any agreed deductions. Why would a landlord want to delay receiving money? Why would a landlord want to employ an agent to delay receiving money when they would otherwise receive the money much quicker without an agent?

Finally the fiduciary duty covers secret profits – if an agent withholds the landlords money and and it earns interest, they should pass this on to or declare it to the landlord otherwise it becomes a secret profit and is a fundamental breach of contract.

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