LANDLORD ESSENTIALS: Deposits

As part of the upcoming podcast, The Legal Stuff, I’ve shared a series of articles about the essential elements of being a landlord and owning investment property.

I wanted to talk to you about Deposits. A few things have changed since the Tenant Fee Ban in 2019 so this may potentially answer any lingering questions!

HOLDING DEPOSITS

In general, I recommend taking holding deposits. You need to remember that you can only take a maximum of 1 weeks worth of rent. This enables the prospective tenant to make that commitment to securing the property for themselves and that they’re able to proceed with the tenancy. 

However you need to remember that a tenant is not legally obliged to take the property if they put down a holding deposit. Typically, this is a refundable deposit if they chose not to take the property however there are a few instances where you can retain that holding deposit. These instances are:

  • If the tenant has misled you, or lied to you and subsequently failed the credit check or referencing, you can keep that deposit.
  • If they chose to withdraw their rental offer after the credit checks etc have been done, then you are entitled to keep that holding deposit for administration fees. It has been their choice to withdraw. 

However you need to be cautious with this and be a human being about it. As we’ve seen over the past few months, situations can change very quickly. If they are no lo longer proceeding with a tenancy due to redundancy or something that is out of their control, you need to be a human about it. 

TENANCY DEPOSITS

The full tenancy deposit is completely separate to the holding deposit and there are a lot more rules and regulations around them so it’s important not to confuse the two. 

Your deposit can only be up to five weeks worth of the rent. It’s always worthwhile requesting the full five weeks worth of rent because it protects you as a landlord financially however it also protects you against damages as well. 

Now, this is the important part: you must register any deposit with a government approved scheme within 30 days of receiving it. 

This is where the confusion foten comes; a lot of landlords assume that the deposit can be registered within 30 days of the tenancy start date and this is not the case. It must be within 30 days of receiving the deposit.

If you don’t comply with this, it will cost you in the long run. If it comes to a dispute at the end of a tenancy and you haven’t registered the deposit in the right way or timescales, you will not be able to push the claim through. 

The Legal Stuff with be available to download on The Anonymous Landlord podcast from Wednesday 22nd July 2020. To subscribe, just click the link! https://theanonymouslandlord.podbean.com