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Change in Tenants

Sam asked “change of occupancies can be a legal minefield so some clarification on the best procedure would be helpful.”

The document you need is the Deed of Assignment.

The 3 main points to note:

Deposit
We do not know how many of you have been affected by this but DPS in their rules (16c) state that they will only allow registrations to be changed where you have the written consent of the outgoing tenant. So the Deed should include a clause which states that the outgoing tenant permits the landlord to change the registration of the deposit into the name of the new tenant and that the new tenant and outgoing tenant agree to settle the issue of any deposit monies to be passed between them themselves.

Inventory
The Deed also needs to include clauses relating to the inventory. When a tenancy is being assigned the new tenant must be given a copy of the inventory and given the opportunity to go through it before the Deed is signed. This may mean an additional visit to the property. However when the inventory is agreed this should be noted in the Deed and the inventory should be attached to the Deed. If the new tenant takes issue with the condition of the property then have the outgoing tenant and the new tenant deal with that between themselves even if that means the outgoing tenant compensates the new tenant and then have them contact you to finalise the Deed. The new tenant must agree that the condition of the property when they move in is as per the inventory compiled at the beginning of the tenancy. Agents and landlords should not finalise the Deed until the inventory is agreed to as this will affect the landlord’s ability to make any claim on the deposit at the end of the tenancy if the need arises.

It is recommended that you consider both the issues above no matter what scheme the deposit is registered with.

Signature
As you are no doubt aware when tenants enter into a tenancy they do so on a joint and several basis. This means that when one gives notice you can accept it on behalf of all of them and when one defaults in his rent payment you can seek the default amount from those that have already paid. It is due to this joint and several principle that many argue that when there is going to be a change in tenants that the remaining tenants consent should be sought and they should also sign the Deed.

It is therefore advisable that all the tenants that remain also sign the Deed along with the outgoing and new tenant and of course the landlord. However obtaining everyone’s signature is sometimes easier said than done. Whilst you can choose not to release the outgoing tenant unless they obtain the consent of the others, if for example, they are leaving the country they are unlikely to be too concerned about the procedure that they need to follow. Therefore if you obtain the signature of only the outgoing and new tenant along with the landlord the new tenant has at best an equitable right to remain in the property where rent is paid and accepted. This means that possession proceedings can be pursued against all those in the property following the assignment but the assignment needs to be fully explained in the court papers.

The problem with this issue is that there is no legislation or case law that supports the view that everyone should sign or not as the case may be. There is also the concern that in the case of an assured shorthold tenancy the new tenant could argue that he has 6 months security of tenure because he has a new tenancy. At PainSmith, 2 solicitors a barrister and 2 paralegals argued over this issue for some time and still there is no consensus. Therefore whilst the easy option is to sign a whole new tenancy this may not be what the landlord wants because of the security of tenure issue and as such the Deed with only the outgoing and new tenant signing maybe the only option available with the landlord warned of the above risks. To minimise the signature being a problem agents could consider handing tenants a letter at the outset explaining that if there is to be a change that everyone will have to sign a Deed and if they do not that not change will be considered. We can draft a template of this letter for readers to purchase if needed.

Sam thank you for the feedback and sorry for the delay!

4 Comments

  • mark 20th September 2011 at 12:25 pm

    With less than six months to run on an AST where a change is requested and the landlord accedes, is it not possible to effect the same using a license to occupy?

    • PainSmith 20th September 2011 at 8:36 pm

      Any license would be handed to the licensee by the tenant that is leaving but it would be very difficult tp persuade any court that this was a license. The landlord is therefore in danger of inheriting a sub tenant.

  • Gem 21st September 2011 at 10:52 am

    Just a quick question, does the document signed have to state that it is a deed of assignment, or is it implied?

    Many thanks, a fantastic post.

    • PainSmith 21st September 2011 at 3:09 pm

      It has to state it is a deed and must be sighed as a Deed. Therefore the signatures have to be witnessed too.

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