The rental gazump: at an apartment near you

A friend of mine was recently gazumped. OK, so it wasn't the kind of gazumping that we generally hear about - where a vendor pulls out of an apparent deal to sell and either hikes up the asking price or sells to a higher bidder - but a species of gazump that is no less devastating when you find yourself homeless. Her experience was the rental gazump. This friend headed off to Portugal for two weeks at the end of August, happy in the knowledge that on her return she would move into a brand new apartment in Dublin 5, with her two flatmates. The rent was £1,000 per month and the three had confirmed their interest by paying an initial sum of £200 "good will" money up front to a local agent.

Work references were supplied followed by a cheque for £800, which was to be added to the good will money to make up the balance of their deposit. Everything seemed to be going to plan until she landed back in Dublin to discover that the rug had been well and truly pulled from under her tanned feet.

A note had arrived from the letting agent returning the deposit and stating simply that the landlord had made further improvements to the apartment and was increasing the rent to £1,100 a month. It went on to say that the landlord now wanted tenants who could move in straight away.

A call to the agent confirmed that the landlord had got a better offer and was going with it regardless of any previous agreement made between the agent and the three prospective tenants.

So, it appears that the landlord can play God - at least until the lease is signed. And while it obviously wouldn't be fair to tar every landlord with the same brush, it seems that we are entering the realm of a new rentalstock starved era where this type of occurrence is becoming more frequent. Recent measures by the Government to moderate house prices - such as the introduction of a 2 per cent anti-speculative tax and a 9 per cent stamp duty rate on second or additional residential properties - will have the added effect of putting a damper on the supply of rental accommodation.

The gazumpee has very little comeback and, according to Liz Roche, senior negotiator with Sherry FitzGerald's Lettings Department, the agent is relatively powerless to do anything if a landlord reneges on a deal before the lease is signed.

"The agent's fee is the equivalent of one month's rent and we don't get paid until the lease is signed," says Ms Roche. "Until then, any monies we receive are held in a client account and are not transferable until the lease agreement is signed. If the landlord pulls out of the deal, decides he wants to handle it himself or go with another letting agent, then we do not get paid, even if we have spent time showing people around the house. "

Carina Warner, Lettings Manager with Hooke & MacDonald, says that while in her experience, most landlords tend to honour any agreements made, the best course of action is negotiation if a landlord decides to renege on a deal.

"We would try to explain that pulling out of an agreement after references have been accepted and the deposit has been forwarded is not going to help the agent's reputation. If a verbal contract has been made and money has changed hands, depending on the situation, there is a possibility that the prospective tenant could be verbally covered."

The question of whether a prospective tenant has made a verbal tenancy agreement with the agent or landlord is a tricky one and one which is difficult to prove. David Colbert, a partner with Sheehan & Company Solicitors, says that when deciding if there are grounds for legal action, each case has to be judged on its own merits.

"The relationship between landlord and tenant is based on contract law and it may be possible to establish that an oral tenancy agreement is in place. Usually, a letting agent will protect themselves and their clients by issuing a receipt for a deposit which will deny the existence of a contract or a lease and will state that the deposit is accepted subject to a formal lease being signed. This would be relied upon by the agent and the landlord to deny the existence of an oral tenancy agreement."

When dealing with a landlord directly and no written documentation is furnished, it may be possible to prove the existence of an oral tenancy provided the requisite terms of the tenancy have been agreed. For example, the amount of rent, the length of the term and the identity of the premises. However, this can be difficult to prove unless there is a third-party to witness the agreement, otherwise it can be a case of one person's word against the other.

Kieran Ryan, director of Threshold, says that while rental gazumping cases are not a major part of his work, his agency has come across a number of recent incidents.

"We would have come across a number of situations where people have reached agreement with a landlord or agent and then got a note or phone call to say the offer had been withdrawn. The groups of people particularly vulnerable are lone parents and the unemployed who may have reached a verbal agreement, supplied references and then the landlord changes his mind, gets someone they deem to be a more suitable tenant or a better offer. Tenants are highly vulnerable and have few rights and entitlements in the current market.

"This type of sharp, unprofessional practice discredits landlords and the letting agents. It's a landlord's market and they can do what they want. It highlights the need for general regulation in the market place."