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Protecting Deposits

Protecting Deposits

Landlords often ask a new tenant to pay one month's hire in advance and a deposit. The deposit is held by the landlord until the tenant leaves the property. If there is damage to the property or hire arrears the owner 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 in the UK. They are custodial or insurance primarily based schemes.

Custodial - this type of protection requires the owner to pay the total amount of the deposit to a registered scheme. The cash 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 uses an adjudicator to arbitrate between landlord and tenant. The adjudicator's decision is usually final.

Insurance - with an insurance type scheme the landlord retains the full deposit. The landlord pays a charge for insurance to protect the deposit. The insurance must be taken with a government 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's a dispute. If a dispute does arise the adjudicator would 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. Info regarding the registration of the deposit should be provided to the tenant. Under the Housing Act there's a prescribed format for info to be supplied. The landlord will be taken to court by the tenant the place the information has not been provided within the correct format. Tenants have the precise to go back six years before taking action in opposition to the landlord.

The place the landlord fails to register the bond there are hefty penalties. The owner will be required to pay the tenant a sum 3 times more than the deposit; or they are often required to pay back all hire plus a penalty or the owner might lose the proper 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 two months hire in advance. If the tenant pays hire monthly and the landlord always has a float of 1 month's lease this is the same as taking a deposit and the principles relating to failure to register a deposit will apply.

Currently there are only 4 approved tenancy deposit schemes. Info may be discovered on the website.

Every time a tenancy is renewed the insurance on the deposit must also be renewed for instance 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 should also be renewed. To save on expenses many landlords difficulty one tenancy for a fixed time period interval with a clause stating the tenancy becomes a month-to-month contractual tenancy on the end of the fixed term. By having one tenancy at some point of the time a tenant is in the property the landlord need only pay one price to protect the deposit.

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