What is a deposit and why would I take one?
Most private landlords require a deposit from tenants to hold for the duration of the tenancy. This is to protect the landlord against the tenant failure to adhere to the terms of the tenancy agreement. A deposit is normally taken from a tenant at the start of the tenancy or when the tenancy agreement is signed. Where a deposit is paid in cash or by cheque the landlord should give the tenant a receipt and keep a copy for themselves.
The landlord and the tenant should make sure that the tenancy agreement states:
- How much the deposit is
- Where it has been protected
- When money can be deducted from it
- When the tenant will get the money back
- When the tenant moves out the deposit should be returned to the tenant less any deductions for costs incurred to the landlord.
Deposits can cover:
- non-payment of rent
- damaged items
- stolen items
Landlords should not expect to receive a property back in the exact same condition as it was at the start and allowances should be made for reasonable wear and tear. The landlord can expect that the property be clean and tidy, but the length of time a tenant has been living in the property must be taken into account. For example paintwork will be less fresh and carpets may be worn etc.
What is Tenancy Deposit Protection and what does it mean for me?
The Housing Act 2004 provides specific requirements for any landlord taking a deposit after 1st April 2007 for an Assured Shorthold Tenancy, to join a Tenancy Deposit Protection Scheme. The scheme will only apply to Assured Shorthold Tenancies.
There are three approved schemes for a landlord to choose from and all three schemes two types of protection:
- Custodial - where the scheme administrators hold the deposit, or
- Insurance - where the landlord holds the deposit but has to pay an insurance premium.
The regulations require landlords to provide tenants, not less than 30 days after the taking of the deposit, details of the scheme under which it is held. At the end of the tenancy the landlord should return the deposit to the tenant or provide reasons why the wish to retain the deposit within 10 days. If the landlord and tenant cannot agree on how much deposit should ne return to the tenant and how much should be retained by the all the schemes are supported by an alternative dispute resolution (ADR) service. The ADR will look at the supporting documents (i.e. inventory, rent statements etc.), make decision and advise both parties. If the landlord and tenant do not decide to use ADR they can decide to go through small claims court but fees will apply.
What if a take a deposit and do not protect it?
If deposits are taken but are not protected by one of the statutory schemes, the tenant can ask for the return of all or part of the deposit. If the landlord refuses this the tenant can take the landlord to court. Changes in the law from April 2012 allows courts to order landlords who fail to comply with the law on tenancy deposit protection to pay compensation to the tenants. This compensation should not exceed 3 times the value of the deposit.
A court can order landlords to pay compensation if:
- The landlord protects the deposit after the prescribed 30 days
- Fails to give the tenant details of the scheme used in 30 days
- Fails to protect the deposit
- The court can also order the landlord to protect the deposit if they have failed to do so.
What happens if a have taken a deposit but want to end the tenancy?
If a landlord has not protected the deposit or provided the tenants with the relevant details about the protection they will not be able to use the no fault section 21 procedure for obtaining possession of the property. If a landlord hasn’t protected the deposit a section 21 can only be used if:
- They return the deposit to the tenant in full or with deductions agreed by the tenant, or
- The tenant makes a tenancy deposit claim and the court decides the outcome, or the action has been withdrawn or settled.
A landlord may still be able to get a court order to evict for other reasons, such as breaches of tenancy terms.
Where can I protected the deposit?
The following are the three companies awarded by the Government to operate the Schemes:
Further information about the details of the Tenancy deposit protection is available on the website www.gov.uk/tenancy-deposit-protection/overview