Rent Deposits and Deposit Schemes

Rent Deposits and Deposit Schemes Deposits

Can the landlord charge a deposit?

The landlord has the right to ask you for a deposit that they have decided before you move in.  It acts as insurance against any damage and covers the landlord for any un-paid bills or rent.  The amount is negotiable, but it is likely to be equivalent to two months’ rent.

If you can’t afford the deposit then you can ask your local authority’s housing department or the housing advice centre whether there is a rent or deposit guarantee scheme, which will guarantee rent or damage cost for a certain period of time.

What are tenancy deposit schemes?

Landlords are required under the Tenancy Deposit Protection legislation to protect deposits for all assured short hold tenancies created in a government approved scheme. 

Three schemes exist for the protection of your deposit, and all three are there to provide a free dispute resolution service in the event of an argument about the return of a deposit. 

Two are insurance based and the third is custodial, and it is the responsibility of whoever holds the deposit (landlord or letting agent) to ensure the deposit is securely protected in an authorised scheme.

Under the three schemes the tenant pays the deposit to the agent or the landlord, and under insurances based schemes they will retain it and will pay a premium to the insurer; under custodial schemes the holder will pay direct into the scheme.

Failure to follow these regulations will have serious consequences for the landlord.  If they fail to protect it within 30 days from the date of receipt , they can face a fine of up to 1-3 times the amount of the deposit.  They will not be able to gain possession using section 21 (notice only) of the 1988 housing act.

Within 30 days of receiving a deposit the landlord or agent must give the tenant details about how their deposit is protected including:

The contact details of the tenancy deposit scheme being used

  • The landlord or agent’s contact details.
  • How to apply for the release of the deposit.
  • Information explaining the purpose of the deposit.
  • What to do if there is a dispute about the deposit.

Your deposit at the end of the tenancy: custodial protection schemes

  • If agreement is reached about how the deposit should be divided, the scheme will return the deposit to you and the landlord, divided in the way agreed by both parties.
  • If no agreement can be reached, the scheme will hold the deposit until the dispute resolution service or courts decide what is fair.

Your deposit at the end of the tenancy: insurance schemes

  • If agreement is reached about how the deposit should be divided, the landlord or agent should return the agreed amount to the tenant.
  • If no agreement can be reached, the landlord or agent must hand over the disputed amount to the scheme for safe keeping until the dispute is resolved.
  • If for any reason the landlord fails to comply, the insurance agreements will ensure the return of the deposit to the tenant if they are entitled to it.

Deposit disputes

If you are unable to reach an agreement over the deposit, the protection scheme become involved and resolves the dispute for free.  This is called the alternative dispute resolution (ADR) and if you and the landlord both agree to use the service to resolve the dispute you are both bound by the decision. 

This does not prevent you or the landlord deciding to take the matter to the small claims court instead of using the ADR.

Under the custodial scheme, the scheme will continue to hold the disputed amount until the ADR or courts decide what is fair.  Under the insurance schemes, the landlord (or the agent) must hand over the disputed amount to the scheme to hold until an agreement is reached.  If the agent or landlord fails to do this then the scheme will pay the tenants the owed money and then endeavour to get the rest back from the landlord.

Further advice on tenancy deposit schemes can be found on the Direct Gov website.

Deposit conditions in the tenancy agreement

The tenancy agreement should clearly state all the circumstances in which the deposit will be returned.  A list of furniture/items in the premises needs to be agreed, and photos should be taken on move in day in case you have any disputes about the damage of items.

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