Deposit schemes for landlords
It is important for landlords to be able to protect their investments. As much as referencing and meeting potential tenants can give you a good indication of whether they will keep up their rent payments and look after the property, you will still need something to fall back on if things don’t work out. Deposits are there for you if damage is caused to the property or if the tenant can’t pay their rent. However, in the UK it is now written into law that landlords must protect the deposits they take using government backed schemes.
Generally, when a tenant moves into a new property they will be required to provide anywhere from 4-6 weeks’ worth of rent in advance. If things don’t work out then at the end of the tenancy the landlord might be able to make reasonable deductions for things like cleaning bills, damage to the property and any unpaid bills.
However, it is now compulsory for landlords to protect that deposit within 30 days of receipt and also provide the tenant with detailed information about the deposit and how it is being protected.
This information must include the amount of deposit taken, the address which the deposit relates too, details of the particular scheme which is protecting the deposit, details on the process for handing back the deposit and how deductions might be made if necessary. It must also include both parties contact details and anyone else involved, such as letting agents.
There are three main schemes that can be used to safeguard a tenant’s deposit. These are Tenancy Deposit Scheme (TDS), Deposit Protection Service (DPS) and MyDeposits.
If landlords fail to protect their tenants deposit within 30 days then they can be taken to court and could face penalties of up to three times the value of the initial deposit amount.
Although the vast majority of tenancies are beneficial to both parties, there are occasions when things go wrong and if a dispute arises the Tenancy Deposit Scheme can mediate between the two parties and make a decision on what is a fair amount to deduct from the tenant’s deposit.
For more tips and advice on buying to let take a look at our guide.