Few things have caused more ill feeling between landlords and tenants over the years than deposits. In the bad old days, some landlords would demand a hefty deposit from tenants, then return only a fraction of the deposit at the expiration of the tenancy, citing ‘wear and tear’ to the property. And the tenants, in many cases, would just have to grin and bear it!
Now, thanks to compulsory deposit schemes introduced by the government, the system is far more transparent & equitable to both parties. Whether you are a landlord or a tenant, you will need to familiarise yourself with these schemes.
Here’s our list of the top 10 points to bear in mind:
- Deposits are paid at the outset of a tenancy and are typically equivalent to one month’s rent – occasionally more – to cover such things as damage to a property, cleaning & unpaid utility bills.
- Since 6 April 2007, Landlords have been required to safeguard their tenants’ deposits with one of three government-backed deposit protection schemes: Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme.
- There are two basic types of deposit protection scheme – custodial & insurance. Under the custodial scheme the landlord lodges the deposit for the duration of the tenancy. The money is then released to the tenant when the landlord and tenant have agreed how much of the original deposit should be repaid. Under the insurance scheme the landlord pays a fee to have the deposit protected, then repays the tenant at the end of the tenancy. If he fails to do so, the insurer will pay the tenant directly, then try to recoup the money from the landlord.
- The onus of putting a tenant’s deposit in a protection scheme falls squarely on landlords, or their agents. It must be done within 30 days of the signature of a rental agreement, and landlords are required to inform tenants which protection scheme they are using. They are also required to supply further information, such as the circumstances in which they would propose not to return some or all of the deposit.
- Deposit protection schemes are not applicable to any deposits paid before the signing of a rental agreement. Protection schemes are also not required when landlords are living in the same property as the tenant.
- If a deposit is paid by a third party (perhaps the tenant’s parents), a full deposit protection scheme is still required by law.
- Inventories are not a formal requirement under deposit protection schemes. But it is beneficial to both landlords & tenants to have an agreed record of the state of a property, and of its contents, at the start of a tenancy.
- Letting agents are empowered to act on behalf of landlords, and often do.
- At the end of a tenancy, tenants can expect to get their full deposits back, provided they have paid all outstanding bills and stuck to the terms of the tenancy agreement, and provided there has been no damage to the property or its contents. The question of damage can be a matter of dispute between landlords and tenants.
- Should the landlord & tenant remain unable to agree how much of the deposit the landlord should retain at the end of the tenancy, such issues can be ironed out via the protection scheme’s resolution service. A tenant also has the protection of the law, in the form of the county court, if they suspect that the landlord has defaulted on their duty to lodge a deposit in a deposit protection scheme.