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Deposit Dos and Don'ts - Part 1: Your questions answered

Hundreds of you joined us for part one of our Deposit Dos and Don'ts webinar, hosted in conjunction with the National Landlords Association and mydeposits. Watch the video playback of the webinar below.

Join our next free webinar: Deposit Dos and Don'ts Part Two, taking place on Tuesday, 12 September at 7.00pm. The concluding part of this series explores the dramas of deposits and will see Adam and Suzy discuss deposit disputes, how to avoid them, along with protecting yourself and adjudication. Register here for free

The first deposits webinar provoked plenty of interesting questions from landlords all over the UK, and we've worked with the NLA's Advice Line and the team at mydeposits to answer them all:


Q

My letting agent disappeared with rent plus deposit. Where do I stand?

A

So long as the deposit is correctly protected your tenant will still have the opportunity to raise a dispute within 3 months of leaving the property. This is an extremely pertinent question at the moment and obviously in this scenario it would be too late but landlords should be vigilant. Check out your agent before handing over your property to be managed. See if they are accredited or at the very least have Client Money Protection (CMP) in place. This insurance product covers any rent, unprotected deposits or other outstanding monies your agent was holding. CMP is expected to become mandatory in England in 2018 following a Government announcement earlier this year, however in the meantime make sure your agent has the protection through their trade body, or an independent supplier such as Client Money Protect


Q

I gave deposit back to tenant. Later tenant decided to stay on and said will give deposit back but has not yet so far. What is my position now?

A

The best solution to this question is to pre-empt the scenario by discussing your end of tenancy procedure two to three months prior. This allows all parties to prepare in good time and allows you to negotiate effectively for any deposit deductions. However, should you find yourself in this scenario you should refer back to your tenancy agreement. As most do, the contract is likely to stipulate a mandatory deposit and refusal to pay this deposit will be a breach of the tenancy terms and therefore it would be suggested you seek some independent legal advice to formulate a solution.


Q

I didn’t protect a deposit in time, and returned it to the tenant in full once I realised my mistake. They’ve now moved out, but are threatening legal action over my failing to protect their deposit, do they have a case for this?

A

Unfortunately the law is very clear: any failure to comply with the legislation allows the tenant claim for the full set of penalties. The court will then exercise their full discretion depending on the severity of the case. It must be noted, this is exactly why landlords should educate themselves prior to undertaking any landlord duties. Tenancy deposit protection is now 10 years old and very much part of the current framework. The original legislation stipulated protection within two weeks so the current 30 days should be enough for a landlord to comply with the requirements.


Q

Do I have to take a deposit?

A

No, it is entirely up to you. No deposit means no protection requirements. However, remember that if you take any monies that could be deemed a deposit you should protect it. The court have become very wise to these tactics and therefore have been known to take a firm stance. It doesn’t matter what you call it, if the money looks and acts like a deposit then you need to comply with the law.


Q

I have a property with sharers, should I take individual deposits from each of the tenants, or one from the household as a whole? And how would I go about splitting this if one tenant moves out?

A

Either is fine, so long as the contract reflects the arrangement. If the tenants share one contract they are ‘joint and severally’ liable. This means all responsibility is shared and therefore in theory each tenant is equally accountable for any deductions and due an equal amount of the returned deposit. If you prefer to separate the responsibilities of your tenants then each tenant should have their own individual contract with their own terms and therefore protected individually. However be aware that you may stray into the often murky and legislatively saturated House of Multiple Occupation scenario. Again, make sure you seek independent legal and financial advice to ensure you comply with your local requirements as well as the wider national law.


Q

Can I take a deposit from a guarantor, or does it have to be proven to come from the tenant’s bank account?

A

Yes, you can. Just make sure you take full details of the guarantor and register them as an interested third party when protecting the deposit. We’ll require their name and contact information.


Q

I’ve taken the deposit in cash, can I send the cash to place in your custodial scheme?

A

Personally, I always advise landlords (and, indeed, agents) refrain from dealing in cash full stop. Taking rent and deposits in cash can raise all sorts of concerns including money laundering and for that reason mydeposits only take payments by cheque, BACs or card payments. If you absolutely have to take these payments in cash make sure you issue a receipt and keep a signed copy whilst also ensuring you know the source of the cash is not from a suspicious source.


Q

Do I have to re-protect my tenant's deposit when my tenancy changes from periodic to rolling?

A

You only need to re-protect if a new fixed term begins, or the deposit amount or tenants change. If the contract is not changing then we offer landlords/agents the opportunity to convert their protection to reflect its new Statutory Periodic status – i.e. a month to month rolling tenancy. Just login to your member portal and you’ll find it is a very simple, one-click process. If there are no changes to the contract there is no need to reserve PI.


Q

If the changes to deposits come into force and I am not allowed to take six weeks any more, will I be allowed to ban tenants with pets, or will that be seen as unfair?

A

This is an interesting scenario as nobody really knows how it will play out – it is new territory for all of us. All I can advise here is that however the deposit cap effects the market you need to make sure you protect the deposit you take. I can only advise on what to do once you’ve taken the deposit. As to what you can take and who you can turn away you will need to instruct some independent legal advisers.


Q

If a tenant is having cash flow problem when the notice is given can the landlord use the month's deposit as the last month's rent provided there are not repair etc expenses in the property?

A

It is not an ideal situation to adopt as the tenants can cause damage in the property right up to the time they move out. If you agree to use the deposit as the last months’ rent, which would normally be payable at the start of the last month, then you will have no money left to cover any dilapidations which may yet happen. Having said that, in practice, this does not stop you choosing to agree to this with a good tenant


Q

Does this apply to room rental that do not have an AST?

A

The law only requires deposits relating to an AST to be protected, however your landlord can use a custodial scheme to protect it free of charge if they so wish. For the same reasons as Q1 it is not good practice to allow a tenant to not pay the last months’ rent.


Q

How do I claim from the tenant a sum over and above the deposit held?

A

Depending on the amounts which are being claimed, there are options to consider. If the deposit will cover the dilapidations then the scheme can deal with these and the rent can be dealt with by the Courts. However some people choose to take the whole matter to the court for it to be dealt with together. It is worth pointing out that if the deposit is awaiting a court order before being released to ask the judge to add this direction to his judgement, so the deposit distribution is clear for the scheme.


Q

If you have sent prescribed information do you still have to send the tenant a copy of the deposit confirmation?

A

By law you must send a signed copy of the Prescribed Information. This is made up of both a certificate confirming protection of the deposit and a document providing information on the scheme it is protected with and how to raise a dispute.


Q

I can’t have an AST so have to handle deposit myself or leave it with the agent. I would like to leave it with a scheme but none will take it on

A

If the tenancy is not an Assured Shorthold Tenancy you may still protect it with one of the custodial schemes.


Q

Does all of this apply to Scotland too or only England and Wales?

A

The legislation was first introduced in England and Wales 10 years ago. However Scotland, Northern Ireland and Jersey all have their own regional mandatory requirements for deposit protection. mydeposits is the only scheme that administers the scheme in all regions so please take a look at the relevant website to see how the schemes differ in each region:
http://www.mydepositsscotland.co.uk/
http://www.mydepositsni.co.uk/
https://www.mydepositsjersey.je/


Q

When should a deposit be registered if it has first been placed with the Agent and it takes weeks before it is sent to the landlord?

A

The deposit should be protected within 30 days of the tenant first handing it over. If this first went to the agent then it should be protected within 30 days of them receiving it.


Q

Are guarantors entitled to this information?

A

Guarantors, if they are listed on the tenancy agreement, should be registered on the protection certificate however the contractual relationship is between the landlord and tenant and therefore there is no mandatory requirement for the guarantors to be given copies of the Prescribed Information. For transparency, best practice would be for the guarantor to request a copy of all documents, for which he has accepted some responsibility, from the tenant.


Q

What happens when a fixed term tenancy becomes a periodic tenancy ` do I have to re register the deposit?

A

Each scheme covers this slightly differently. At mydeposits we offer a 30 day window after the End Date of the tenancy for the landlord (or managing agent) to convert their protection to a Statutory Periodic Tenancy (SPT) free of charge. If you miss this window you must re-protect the deposit with the original terms in the agreement and convert it to a SPT.


Q

If there is a fee ban this will incur higher fees to landlords and rent increases, why cant they just fix a tenant fee?

A

There was a considerable amount of consultation and debate on how tenant fees could be regulated or capped prior to the Queens Speech which confirmed a total fee ban. Currently there are no more details and we will just have to wait for further news.


Q

If a tenant pay us deposit 2 months before moving in, is it ok to submit the deposit within 30 days even when they haven't actually moved in yet and the tenancy hasn't started?

A

The legislation stipulates protection of the deposit must be done within 30 calendar days (in England and Wales) of receiving it. The start date of the tenancy has no bearing on when the deposit should be protected. This is common with student lets in particular as these are often taken months before the start date.


Q

What if the tenant refuses to sign the deposit certificate? is email enough?A

The important thing is that you’ve given your tenant every opportunity to receive the information. Any evidence that you have served it is going to help if the tenant tries to deny receiving it


Q

If a six week deposit was taken before the queens speech, do you have to return the extra two weeks immediately ?

A

As things stand, you can continue to take a six week deposit. What the rules will be and when they will be implemented is yet to be decided and it may only apply to new tenancies at the time. Therefore you should be fine to continue taking a 6 week deposit even if the term extends past the formal start date of the tenant fee ban legislation.


Q

If a new 12 month AST is issued each year (ie no periodic tenancy) do I have to reissue the prescribed information each year.

A

Yes. Every new AST requires a new protection and therefore the Prescribed Information should be reissued.


Q

Do I have to send prescribed information if I am renewing the tenancy?

A

Yes. Every new AST requires a new protection and therefore the Prescribed Information should be reissued.




If you have any questions about deposit legislation or registration, or any of the issues relating to it, the NLA Advice Line is free for all members. For membership contact the NLA at 020 7840 8900.


Our next free webinar, Deposit Dos and Don'ts: Part Two, is taking place on Tuesday, 12 September at 7.00pm. The concluding part of this series exploring the dramas of deposits will see Adam and Suzy explore deposit disputes, how to avoid them, protecting yourself and all about adjudication.

Register here for free


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