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Protecting Deposits

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Landlords usually 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’s damage to the property or rent arrears the landlord makes use of the deposit to cover the costs.

Many landlords fail to protect the deposit. There are two types of authorised deposit schemes available within the UK. They’re custodial or insurance primarily based schemes.

Custodial – this type of protection requires the owner to pay the full amount of the deposit to a registered scheme. The money is held within the scheme until the tenant leaves the property. Providing there are not any disputes the deposit is paid back to the tenant. Where there is 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 landlord retains the full deposit. The owner pays a payment for insurance to protect the deposit. The insurance should be taken with a authorities 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 owner to pay the complete 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. Info in regards to the registration of the deposit have to be supplied to the tenant. Under the Housing Act there is a prescribed format for data to be supplied. The owner might be taken to court by the tenant the place the data has not been equipped in the correct format. Tenants have the proper to go back six years earlier than taking motion against the landlord.

The place the landlord fails to register the bond there are hefty penalties. The landlord might be required to pay the tenant a sum thrice more than the deposit; or they can be required to pay back all lease plus a penalty or the owner could lose the right to evict the tenant from the property the decision on the penalty is taken by the court.

Some landlords say they don’t take deposits they only ask the tenant to pay two months lease in advance. If the tenant pays hire monthly and the owner always has a float of 1 month’s rent this is identical as taking a deposit and the rules referring to failure to register a deposit will apply.

At present there are only four approved tenancy deposit schemes. Information might be found on the gov.uk website.

Each time a tenancy is renewed the insurance on the deposit should also be renewed for example if the landlord has a six monthly Assured Shorthold Tenancy and writes a new tenancy agreement at the finish of the six months then the deposit must also be renewed. To save on expenses many landlords issue one tenancy for a fixed time period interval with a clause stating the tenancy becomes a month-to-month contractual tenancy on the finish of the fixed term. By having one tenancy throughout the time a tenant is in the property the landlord want only pay one charge to protect the deposit.

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