Agents Ceasing to Trade
Landlords may be told by their agent that they will be ceasing to trade, for example if they retire. It may be that the landlord is informed of the agency being sold or merged. Occasionally agencies go into liquidation and on rare occasions, simply close the door and disappear.
It is important that a landlord finding themself in any of these situations does everything they can to protect themselves and their tenants as best they can, and to stay within the law. The following points may be of use:
Terms of business
Landlords may be told by their agent that they will be ceasing to trade, for example if they retire. It may be that the landlord is informed of the agency being sold or merged. Occasionally agencies go into liquidation and on rare occasions, simply close the door and disappear.
It is important that a landlord finding themselves in any of these situations does everything they can to protect themselves and their tenants as best they can, and to stay within the law. The following points should be remembered when dealing with this situation:
Terms of business
Refer to the terms of business you have agreed with your agent to see if that sets out whether your business agreement will be transferred to a third party upon sale or merger, and whether you have an option to re-negotiate or end the agreement if you wish at that stage.
Letter to dis-instruct
If after speaking to your agent you wish to terminate your agreement, it would be sensible to set this out in a letter to dis-instruct. Under the Terms of Business there could be cessation clauses that will come into force, and if the agent has complied with his responsibilities these clauses may be enforceable. If the office appears to have been abandoned and contact cannot be made with the agent, it would be prudent to send a letter to dis-instruct, keeping a copy and a certificate of posting. (Do not use recorded delivery if it is unlikely a signature would be gained). It is also worth checking Land Registry to obtain freeholders details. If the agency is a limited company Companies House will have details for the Directors. If insolvent the details of the Trustee in Bankruptcy may be taped to the office door. It is important for the landlord to gain access to obtain copies of the various documents.
Paperwork
Whatever the reason for parting company the landlord should make sure that copies of references, ASTs, EPCs, Gas and Electrical Safety Certificates and any and all paperwork to do with each individual tenancy are obtained. These documents will be needed to pass on to the new agency or retained by the landlord if he or she decides to become a “self-managing” landlord.
Tenancy agreement
A tenancy agreement set up by an agent between you as landlord, and the tenant in your property, remains a valid and legal agreement whether or not the agent is still acting on your behalf. Whilst changes to payment methods may need to change, the tenant continues to enjoy the right to reside on the terms of the existing contract.
Rent
All rent already paid by the tenant to the agent is deemed to have been paid, as the agent was acting on your behalf. Any rent that had been paid but not passed on to you, may become part of a claim between you and your agent (or their insurers), but the tenant cannot and should not be pursued for it. Where rent is being paid by the tenant directly to the agency and the landlord believes that the agency is in financial difficulties the landlord should contact the tenant directly and arrange for direct payment to the landlord’s account from the next payment date. This should be done before the letter of dis-instruction. If the prior arrangement was for the agent to deduct their commission before passing on the rent the agent will still be entitled to the agreed fee and the landlord must discharge this obligation.
Deposits
If the agent took a deposit on the landlord’s behalf, it should have been protected in a government approved tenancy deposit scheme. There are two types of scheme, custodial – where the funds have been transferred by the agent to the scheme, and insurance backed – where the agent holds the funds in a client account. Check with the schemes that the deposits are correctly protected, and make arrangements to re-protect in your own (or a new agent’s name). If you have not been supplied with copies, your tenants should have copies of the deposit protection prescribed information for their tenancy.
In the event that deposits have not been correctly protected, or the client account has insufficient funds to repay them, the responsibility falls to the landlord to repay the tenant at the end of the tenancy unless there are legitimate reasons to withhold. If the agent is holding the deposit and is being “difficult” about its release, It is a good idea for the landlord to agree with the tenant what should happen with the deposit and send a joint letter of instruction. The deposit is the legal property of the tenant and the tenant has an absolute right to decide what should happen to their money.
Letter to tenants
In the event of a merger or acquisition, the new entity will write to your tenants giving them the necessary information. It would be prudent to also write to tenants to tell them first, so they are assured all is in order when that happens.
On dis-instruction of the agent, particularly if they seem to have disappeared, it is important to let tenants know as quickly as possible, and confirm in writing, what the new arrangements are. It may be that you advise them of a new agent, or that the landlord will be self-managing. They will need to be given full contact details (name address, phone etc.) and how and to where future rent payments should be made. It is worth being specific in stating that no further payments are to be made to the previous agent, and naming them.
Client Money Protection
Agents are required by law to have client money protection and to display details in their offices, web site and on third party websites,in England. In Wales Rent Smart Wales licensing requires agents to have client money protection. This is often a requirement of trade organisations or professional bodies such as UKALA, ARLA, RICS or NALS. If the agent has not passed over rent or cannot produce the deposit when required to do so, the landlord may be able to claim on a client money protection scheme.
Licences
If the agent is the licence holder for a property, (under HMO, additional or selective licensing schemes) the landlord will need to make arrangements to change this. Licences are generally not so it can be more sensible for the landlord to be the licence holder going forward, with a named manager if the landlord selects an agent. Any future change of agent could then be dealt with as a “variation” rather than a new application which is considerably cheaper. In the event of an agent collapse, it would be worth asking the local authority if they would treat as a variation to get the landlord as the licence holder as quickly as possible. (If the landlord changes agent for other reasons they would likely insist on a new application). No premises requiring a licence should be without a licence unless the property is no longer let. In which case, the authority may, if provided with evidence, be prepared to grant a temporary exemption for up to three months and six in exceptional circumstances. A Temporary Exemption Notice is free.
Tenant safety
If the agent has merged / been sold or ceased to trade in an un-planned way, it is possible that full diligence has suffered for a while preceding this. It would be worth checking to be certain that safety critical matters such as gas inspections have been completed and rectified immediately if found to be overdue.