Landlords typically ask a new tenant to pay one month’s hire in advance and a deposit. The deposit is held by the landlord till the tenant leaves the property. If there may be damage to the property or hire arrears the landlord uses 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’re custodial or insurance based mostly schemes.
Custodial – this type of protection requires the owner to pay the complete amount of the deposit to a registered scheme. The cash is held in 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 resolution is often final.
Insurance – with an insurance type scheme the owner retains the total deposit. The landlord pays a fee for insurance to protect the deposit. The insurance should 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 also have an adjudicator service in case there is a dispute. If a dispute does come up the adjudicator would require the landlord 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 have to be supplied to the tenant. Under the Housing Act there’s a prescribed format for data to be supplied. The landlord will be taken to court by the tenant where the information has not been supplied in the right format. Tenants have the correct to go back six years earlier than taking motion in opposition to the landlord.
Where the owner fails to register the bond there are hefty penalties. The owner can be required to pay the tenant a sum three times more than the deposit; or they can be required to pay back all rent plus a penalty or the owner might lose the precise to evict the tenant from the property the decision 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 rent in advance. If the tenant pays rent month-to-month and the landlord always has a float of one month’s rent this is the same as taking a deposit and the foundations relating to failure to register a deposit will apply.
Currently there are only four approved tenancy deposit schemes. Data may be discovered on the gov.uk website.
Each 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 must even be renewed. To save on expenses many landlords situation one tenancy for a fixed time period period with a clause stating the tenancy becomes a month-to-month 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 landlord need only pay one payment to protect the deposit.
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