Category: Landlords

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.

The extraordinary story of former Bath Tory councillor Donal Hassett who used false names, references and cover stories to rent homes to create a network of cannabis farms is a reminder of the problem this can be for landlords. Read the full story here

Cannabis farms in rented accommodation have been a problem for landlords for several years. Criminals spread farms around multiple locations to ensure that production continues even when one farm is discovered and closed. It is this need for multiple locations which leads the criminals to rented or squatted property.

For landlords, the discovery of a cannabis farm can be devastating and frightening. Under S.8 of the Misuse of Drugs Act 1971 a landlord (or anyone managing the property) can receive a maximum of 14 years in prison and/or a fine if they knowingly permit the production of controlled drugs to take place in rented accommodation. Arguably, “knowingly permit” could include turning a blind eye to the production of cannabis to ensure that their rental income continues. A further complication for landlords is that they could then find any rental income received seized under the Proceeds of Crime Act.

Landlords and their agents should therefore take steps to minimise the risk of cannabis cultivation in rented accommodation. Some signs to watch out for include:

• Tenant’s paying a large amount of rent up front;
• Tenant’s refusing or making excuses to prevent regular inspections or restricting access to parts of the property during inspections

Landlords should always carry out regular inspections or instruct their agent to and should look out for:

• Strange smells;
• Excessive heat;
• Blacked out or sealed windows;
• New ventilation units;
• Signs of meter tampering.

If there is a suspicion that cannabis is being grown at the property landlords should not address the matter directly with their tenant but should report it to the police. The landlord is then advised to serve the tenant with a Section 8 notice.

If the police discover a cannabis farm they will attempt to arrest the tenant and the landlord will need to co-operate with any investigation. Unfortunately, while removing the cannabis plants from the property the police will often leave behind the pots, soil, heat apparatus and any other paraphernalia connected to the cultivation of the cannabis. This can leave the landlord with a substantial clean-up bill and a lengthy delay prior to gaining possession.

Despite the tenant’s conduct, landlords cannot simply take back possession they will need to wait for a county court order for possession upon the expiry of the Section 8 notice. Where all the tenants have been arrested, and are not to be released on bail then landlords may be able to treat the property as abandoned however, prior to taking any steps in this respect legal advice should be sought.

The Homelessness Reduction Bill has received Royal Assent and become an Act of Parliament. The Act places a new duty on Local Authorities to help prevent the homelessness of all families and single people, regardless of priority need, who are eligible for assistance and threatened with homelessness.

Positive News for Landlords

Until now a common problem for landlords was when a section 21 notice was served, the tenant went to the Local Authority with the notice and the tenant was told that they must wait for a court order and possibly bailiffs before they would be deemed to be homeless and therefore eligible for assistance.The Homeless Reduction Act prevents Local Authorities issuing this advice.

The Homeless Reduction Act amends the Housing Act 1996 adding a new definition of threatened with homelessness:

“(5) A person is also threatened with homelessness if—
(a) a valid notice has been given to the person under section 21 of the Housing Act 1988 (orders for possession on expiry or termination of assured shorthold tenancy) in respect of the only accommodation the person has that is available for the person’s occupation, and
(b) that notice will expire within 56 days.”

Two possible pitfalls to be aware of:

1. The duty only arises if a valid section 21 has been given – landlords need to ensure any section 21 notice they serve is definitely valid.

2. Local Authorities have struggled making decisions on the validity of section 21 notices even before this Act – Local Authorities commonly try to find reasons why a section 21 notice is not valid and no doubt given the fact that some courts struggle with this, this problem will persist.