Today saw the news that the head of a lettings company has been banned from letting out any of his portfolio after he did not sufficiently secure his tenants’ deposits.
Mr Shaban Rehman was found to have kept his tenants’ deposits worth around £7,000 and as a result was removed from Glasgow councils’ private landlord’s register.
In order for you not to fall foul of the rules and risk voiding on your landlord insurance, follow Just Landlords’ guide to deposits!
As a landlord, you are obliged to request a deposit from your tenant(s) to cover yourself against any unforeseen costs that arise from accidental damage or rental arrears.
Deposit schemes-As a buy-to-let landlord or letting agent, it is a legal obligation to secure any deposit given to you by a potential tenant for a shorthold tenancy. The Tenancy Deposit Protection (TDP) process was introduced as part of the Housing Act 2004. These deposits must be protected in Government approved redress scheme, of which there are three choices:
- Deposit Protection Service (DPS)
- Tenancy Deposit Scheme (TDS)
These deposits must be paid into the scheme of your choice within 30 days .This is purely your responsibility as a landlord, irrespective of whether you use a letting agent to manage your property!
Taking a deposit-An average deposit is usually one calendar month’s rent. However, it is your prerogative to charge more for tenants with pets, or if your property is furnished, as there is more chance of damage occurring.
Who does the TDP apply to?-The rules imposed by the Housing Act apply to all landlords and letting agent in England and Wales who has taken a deposit from a tenant under an assured tenancy after the 6th April 2007. In addition, if you have renewed a tenancy previously started before this deadline, then the same rules will apply.
Information for tenants-Once you have paid the deposit into your chosen TDP within 30 days of receipt, you must serve your tenants with information on:
- the address of the property
- the sum of the deposit taken
- what scheme the deposit is protected with
- contact details of the chosen TDP scheme
- name and contact details of any third party involved in deposit, eg the letting agent
- include instructions on how to retrieve the deposit
- steps to take if there is a dispute
Deducting money-You can choose to make deductions to the deposit when a tenant fails to comply with their duties that have been agreed in the tenancy. These could include cleaning deductions, cuts for damages or unpaid/outstanding rent. It is also a good idea to take out rent guarantee insurance, just in case your tenants fall into arrears.
Following the tenancy-Should a sufficient agreement be reached about the return of the deposit, the scheme will return it to you as per these terms. If a dispute should occur, you should be sure to inform your deposit scheme as soon as possible, so they can hold the monies until the dispute resolution service or courts decide on a fair solution.
Following your legal obligations towards deposits is vitally important as a buy-to-let landlord. Further information can be sourced from the government website.