Protecting Deposits

Protecting Deposits

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

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

Custodial - this type of protection requires the landlord to pay the full quantity of the deposit to a registered scheme. The money is held within the scheme till the tenant leaves the property. Providing there are not any disputes the deposit is paid back to the tenant. The place there is a dispute the scheme uses an adjudicator to arbitrate between landlord and tenant. The adjudicator's choice is normally final.

Insurance - with an insurance type scheme the owner retains the total deposit. The owner pays a payment for insurance to protect the deposit. The insurance must be taken with a authorities 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 come up the adjudicator will require the owner to pay the total 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 in regards to the registration of the deposit should be equipped to the tenant. Under the Housing Act there is a prescribed format for information to be supplied. The owner might be taken to court by the tenant the place the data has not been equipped within the right format. Tenants have the precise to go back six years before taking action against the landlord.

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

Some landlords say they don't take deposits they only ask the tenant to pay months hire in advance. If the tenant pays lease month-to-month and the owner always has a float of 1 month's rent this is similar as taking a deposit and the principles relating to failure to register a deposit will apply.

At present there are only four approved tenancy deposit schemes. Information may be found on the website.

Every time a tenancy is renewed the insurance on the deposit should also be renewed for example if the owner has a six month-to-month Assured Shorthold Tenancy and writes a new tenancy agreement at the end of the six months then the deposit should even be renewed. To avoid wasting on bills many landlords situation one tenancy for a fixed term period with a clause stating the tenancy becomes a monthly contractual tenancy at the end of the fixed term. By having one tenancy all through the time a tenant is within the property the owner want only pay one price to protect the deposit.

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