Protecting Deposits

Protecting Deposits

Landlords typically ask a new tenant to pay one month's lease 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 lease 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're custodial or insurance based schemes.

Custodial - this type of protection requires the landlord to pay the total amount of the deposit to a registered scheme. The money is held within the scheme until the tenant leaves the property. Providing there aren't any disputes the deposit is paid back to the tenant. Where there's a dispute the scheme makes use of an adjudicator to arbitrate between landlord and tenant. The adjudicator's choice is often final.

Insurance - with an insurance type scheme the owner retains the complete deposit. The owner pays a charge for insurance to protect the deposit. The insurance have to 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 also have an adjudicator service in case there's a dispute. If a dispute does arise the adjudicator will require the owner to pay the complete 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 should be supplied 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 information has not been supplied in the appropriate format. Tenants have the precise to go back six years before taking action in opposition to the landlord.

Where the landlord fails to register the bond there are hefty penalties. The landlord might be required to pay the tenant a sum 3 times more than the deposit; or they can be required to pay back all hire plus a penalty or the landlord might lose the best 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 months lease in advance. If the tenant pays lease monthly 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.

Presently there are only 4 approved tenancy deposit schemes. Information might be discovered on the gov.uk website.

Every time a tenancy is renewed the insurance on the deposit should even be renewed for example if the landlord has a six monthly Assured Shorthold Tenancy and writes a new tenancy agreement on the finish of the six months then the deposit must even be renewed. To save on expenses many landlords difficulty one tenancy for a fixed term interval with a clause stating the tenancy becomes a monthly 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 want only pay one charge to protect the deposit.

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