Deposits: what landlords get wrong most often

Deposits: what landlords get wrong most often

Policymakers have introduced new legislation to protect tenant deposits across the UK, but some landlords are still getting it wrong, says NLA adviser Alan Jakeway. He explains how to get it right.
What should landlords do with their tenants’ deposits?

Legislation protecting tenant deposits – which came into force in England and Wales in 2007, in Scotland in 2012 and in Northern Ireland in 2013 – requires landlords to protect any deposit via an authorised tenancy deposit scheme, such as mydeposits, the Tenancy Deposit Scheme (TDS) and the Deposit Protection Service (DPS). These schemes come in two forms: insurance-based, where the landlord registers the deposit with the scheme and then holds on to the money themselves; or custodial, where the scheme is responsible for holding on to the deposit until the tenancy ends.

This legislation was brought in to protect tenants. Is it also good for landlords?

It means that someone else is involved, so landlords should have someone to adjudicate if ever there’s an issue. Saying that, landlords have complained that some schemes feel biased towards tenants, but if the landlord has a thorough inventory when the tenants move in and out, that shouldn’t happen and it should be plain sailing. The scheme title also gives a clue. It protects tenants’ deposits if a landlord uses an agent that takes and holds the deposit. Be sure to choose an agent that holds client money protection.

What do landlords get wrong?

The biggest issue is that landlords don’t register the deposit within 30 days or send the prescribed information. If landlords take a deposit, they must use a scheme and follow its rules, or risk falling foul of legislation.

What are the consequences?

If a landlord hasn’t carried out certain procedures correctly, it will affect their rights to repossess a property. And whereas things like energy-performance certificates can be rectified at a later date, that’s not the case with deposits. So, if a landlord wants to go down the possession route and hasn’t used a deposit scheme, they have to pay the tenant their deposit back. This will alert the tenant to their error and potentially lead to the landlord being taken to court and fined up to three times the amount of the deposit.

If a landlord is unsure they’ve followed procedures correctly, what should they do?

Look at the deposit scheme they’ve used and make sure they’re up to speed with the requirements.

If in any doubt, give us a call on 020 7840 8939. (The Advice Line is free for members; associates can either upgrade to full membership or buy call credits to use the service.) You can also read more at www.landlords.org.uk/about-nla/tenancy-deposit-protection

Update on Tenant Fees Bill

The government has published the Draft Tenant Fees Bill, which is currently undergoing scrutiny in Parliament. Initially, it was expected to include a proposal that the deposit a landlord in England could ask for should be limited to four weeks’ rent. However, after concerted lobbying from the NLA, this figure has been raised to six weeks. Chris Norris, director of policy and practice at the NLA, said: “While we disagree with the need for a cap, the NLA is satisfied that the government has listened to the evidence we presented… extending the cap will significantly reduce those households and landlords disadvantaged by the policy.”

Did you know? The NLA offers a government-authorised tenancy deposit protection scheme. If you become a member, you will receive discounted rates for the service. Find out more about mydeposits at www.landlords.org.uk/services/mydeposits

2 thoughts on “Deposits: what landlords get wrong most often

  1. Regarding tenants deposits in the new Tenants fee bill – has anyone considered the implications of a tenancy renewal where the current deposit held greater than 6 weeks rent? Are landlords likely to be required to return overpaid deposit?

    1. Originally we campaigned to keep the lack of deposit cap, as this allowed the market to effectively regulate deposit sizes. This often led to maximum deposit charges of two months’ rent, as this was commonly gauged as the top end of affordability by landlords.
      In regards to overpaid deposits, it’s unlikely landlords will be explicitly required to, but as the deposit will be kept in the DPS, the tenant may be able to raise a dispute. We would also recommend doing this as part of good practice.

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