Taking Deposits – you MUST comply
The current position on deposits [revised June 2019 Tenant Fees Ban] Deposit capped 5 weeks rent upto 50K rent per annum 6 weeks cap above See PIMS Full Guide to Tenant Fees Act)- Tenancy Holding fees are also capped at one weeks rent see Cap on Holding fees
Where a Landlord or Letting Agent issues a tenancy agreement which is in respect of a new tenancy or a tenancy being renewed, if a deposit is received such deposit should be protected in an authorised tenancy deposit scheme.
Within 30 days of receiving a deposit the Landlord or Agent must lodge the deposit in a scheme or insure it. They must also give the tenant and any other person/entity who provided the deposit, details about how their deposit is protected – see Deposit Information to be supplied to the Tenant. If one fails to comply they MUST return the Deposit or be unabe to issue a issue Section 21 Notice to end a tenancy and be exposed to a mandatory fine [ being no less than one times and no more than 3 times the deposit value)
For failing to comply
exposes you to penalties and fines,
the inability to make deductions from any monies held that are not protected
you rescind your right to mandatory eviction by post
Counter claims on eviction for rent arrears read more
Attempts to circumnavigate futile including taking first and last months in advance
Is it worth taking a Deposit?
Many consider taking deposits of less than £400 is simply putting an unnecessary burden on you; the risk reward ratio of compliance is simply not worth it. Where your tenancies are of such value consider:
Charge 6 weeks deposit provided this does not put you at a disadvantage.
Charge an Administration fee for commencing the tenancy where you recharge vetting tenant tracing. but becareful for Advertising Standards want the law changing
Promote NO deposit as a competitive advantage; this may minimise rent void period; provided you have a guarantor.
Many Landlords feel in the event of a disputed deposit the process whereby they rely on the governance of the schemes is often biased towards the Tenant. The following may assist you in making your decision –
91% of dispute cases settled by the scheme’s independent adjudication service found in favour of the tenant.Chief Executive of ‘Mydeposits’ Eddie Hooker, says “Mydeposits.co.uk exists for tenants” (3rd April 2009) the average amount in dispute was £733, which is significantly lower than the average deposit of £1,052.
To increase your chances of deducting monies for damage and rent arrears from a deposit you should use our agreement, then issue our prescribed information that fully states the deductions that may be made and it’s always best to take photographic evidence to accompany your inventor.
When you renew a Tenancy where a deposit was taken prior to April 2007, that deposit then becomes subject to the Tenancy Deposit Legislation.
Assured Tenancies, Company Lets and Contractual Tenancies, Lodgers Agreements are exempt from the Tenancy Deposit Legislation.
The Tenancy Deposit schemes do NOT provide the prescribed information to the Tenants.
Your Tenancy Agreement should include clauses notifying the Tenant where such deposit is protected as does the PIMS Agreement. This protects you from claims that the Tenant did not know where the deposit is protected.
Prior to Aug 08 the Tenant could also sue you for failing to issue the prescribed information. Whilst previous case law Harvey v Bamforth, Sheffield County Court now negates such action New laws introduced Arril 2012 mean these defences can no longer be relied on . A Tenant can invalidate an application for possession by claiming you breached the housing act as you failed to provide them with the prescribed information or other relevant person(s)/entity such as parent council etc