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Estate Agent - deposit and tax issues

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Hello and apologies in advance. This is going to be a long one:|


Fingers crossed that I am posting this query in the right place.


Hoping someone here can offer some help.


A relative (non EU) become an accidential landlord. She emigrated to the UK, worked here for a number of years, purchased a property which she lived in and then decided to return to her homeland. She informed her lender that she would be renting out her property. She has a residential / interest only mortgage.


She left her property in the care of an estate agent No1 and for a number of years this worked well. Due to a number of issues she decided to cut ties with the estate agent and turned over her property to another estate agent (No2). He was responsible for finding the current tenant. The tenant paid the usual 6 weeks deposit to estate agent No2. I should mention that the estate agent no2 owns the management business.



To cut a long story short, Estate Agent No2 was not responsible, payments were never on time (even though the tenant paid rent on a regular basis). Payments were erratic, differed each month if paid at all. He would pay his staff first and any left over would be deposited to his clients if they were lucky! All this caused a number of late mortgage payments. Thankfully this was minimised as my relative was able to deposit monies into her mortgage account from her savings and had an overdraft. Estate Agent No2 has since filled for bankruptcy and not for the first time! He is personally bankrupt but his estate agency is still trading. I found out about the bankruptcy order by chance by googling his name.


Earlier this year the property was handed to Estate Agent No3 - and so far so good.


I have a number of questions...


The deposit was paid to Estate Agent No2. He has refused to repay the deposit and I doubt it very much he deposited it into any of the new schemes that were introduced. He has essentially pocketed the money! How do we get this money back? How can I check or where do I start searching for this money? Am I right in saying my relative would be responsible for refunding this deposit if the tenant leaves? Do we have to go to court? Luckily the tenant isn't thinking of leaving, but we want to be prepared moneywise.


We have in the last month realised that as my relative earned an income (albeit a loss) on the rent, she may be liable for tax. I am in the process of engaging an accountant to assist re self assessment etc and hopefully this side of things will be in order shortly. In the meantime Estate Agent no3 is holding back part of the rent received as 'tax' until my relative registers with HMRC. They claim they have a responsibility to do this.


My relative is not making a profit on the rent and has not done so for 2 to 3 years. She has had to 'top up' as the estate agent cuts, repairs and other charges and now this 'tax' means she is making a loss. The money she gets from the rent does not cover the mortgage payments. Is it true the estate agent can hold monies on behalf of HMRC?


Any assistance would be grateful.



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all of the expenses that are tax deductable can be offset against other UK income but she will need to get something on paper. If the net result is a loss this can be carried over to the next year if she fills out the paperwork correctly. An accountant will be best for this


Income is just that, not turnover, which is what her rent money is until all of the other bits are deducted/added so dont confuse the 2


AS for deposit- well LL is responsible for the deposit unless managing agent belongs to a proper scheme or si exempt by way of trade association insurance scheme. She will need to find this out but it sounds as though she has lost another sum of money and will still be in bother for not protecting the deposit.

Edited by honeybee13
Paras, typos
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Estate Agent No2


If the have been made Bankrupt you would be a Creditor and Estate Agent No2 should have informed the Insolvency Practitioner appointed to deal with the Bankruptcy if they haven't and you know the Bankruptcy Details I would inform them.


The Insolvency Service: https://www.gov.uk/government/organisations/insolvency-service


If they are Bankrupt then it will be difficult to recover any deposit if they didn't protect it in a Tenancy Deposit Scheme.


What they need to remember is any Deposit should be protected in a Tenancy Deposit Scheme:



Ultimately the Landlord is responsible for any deposit even if they employed the services of an Estate Agent the Landlord is still responsible for ensuring that depositt is correctly protected.

Edited by stu007

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