Protecting Deposits

Protecting Deposits

Landlords usually ask a new tenant to pay one month's rent in advance and a deposit. The deposit is held by the landlord until the tenant leaves the property. If there may be damage to the property or hire arrears the landlord makes use of the deposit to cover the costs.

Many landlords fail to protect the deposit. There are two types of authorised deposit schemes available within the UK. They are custodial or insurance based schemes.

Custodial - this type of protection requires the owner to pay the complete amount of the deposit to a registered scheme. The money is held within the scheme till the tenant leaves the property. Providing there are no disputes the deposit is paid back to the tenant. Where there's a dispute the scheme uses an adjudicator to arbitrate between landlord and tenant. The adjudicator's resolution is usually final.

Insurance - with an insurance type scheme the owner retains the complete deposit. The owner pays a fee for insurance to protect the deposit. The insurance must be taken with a government approved scheme. When the tenant leaves the property the landlord repays the deposit back to the tenant. Insurance type schemes even have an adjudicator service in case there is a dispute. If a dispute does arise the adjudicator will require the landlord to pay the full deposit to the scheme while the dispute is investigated.

A landlord has 28 days to register a deposit with either a custodial or insurance type scheme. Information concerning the registration of the deposit must be provided to the tenant. Under the Housing Act there is a prescribed format for info to be supplied. The landlord can be taken to court by the tenant the place the data has not been supplied within the correct format. Tenants have the appropriate to go back six years earlier than taking action towards the landlord.

The place the owner fails to register the bond there are hefty penalties. The landlord might be required to pay the tenant a sum three times more than the deposit; or they can be required to pay back all rent plus a penalty or the landlord could lose the appropriate to evict the tenant from the property the choice on the penalty is taken by the court.

Some landlords say they do not take deposits they only ask the tenant to pay two months hire in advance. If the tenant pays hire monthly and the owner always has a float of one month's lease this is identical as taking a deposit and the foundations referring to failure to register a deposit will apply.

Presently there are only 4 approved tenancy deposit schemes. Info could be found on the website.

Every time a tenancy is renewed the insurance on the deposit should also be renewed for instance if the owner has a six monthly Assured Shorthold Tenancy and writes a new tenancy agreement at the end of the six months then the deposit must also be renewed. To avoid wasting on bills many landlords subject one tenancy for a fixed time period interval with a clause stating the tenancy becomes a month-to-month contractual tenancy at the finish of the fixed term. By having one tenancy at some stage in the time a tenant is in the property the owner need only pay one fee to protect the deposit.

For more info regarding Hotpads security deposit for rent have a look at our web-page.

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