It’s all change on deposits.
Landlords could soon be restricted to taking no more than a five or six week tenancy deposit – just one of the many changes effecting the private rented sector in recent years. This is in line with a bill currently proceeding through parliament. (The Labour Party’s proposed amendment restricting deposits to three weeks looks likely to be defeated).
Six weeks’ deposit is what I charge. And in the thirty years I’ve been a landlord I have only had to make deductions from deposits on less than 3% of our lets. And only once was this for more than £200 with the bulk of deductions being for cleaning. None of the deductions were disputed by the tenant, who all recognized that some deduction had to be made and that I was only being fair and reasonable.
My tenants have always done their best to leave our places clean and in good order at the end of the tenancy – and that is because we send tenants a list of things they need to do before the tenancy ends, which includes giving them a cleaning guide highlighting the things that tenants often forget to clean. (If only other landlords and letting agents did the same!)
Average deposits in England and Wales are now a little under £1,000, though in London the figure is around £1,750. Approx. £3.8bn is held by the various deposit protection schemes.
Many tenants naturally complain that they have to put up a deposit on a new tenancy before they have got their deposit money back from their previous accommodation. Though deposits should be returned within ten days of a tenancy ending, disputes can mean that monies for damages/cleaning etc. which are in dispute, are held up for much longer, as resolution can take months. (Note that any non-disputed element of a deposit must still be returned in 10 days. Also, a landlord cannot make a deduction for anything that constitutes fair wear and tear. Though this does not stop many landlords from trying it on).
Some of the big Build to Rent operators now often heavily market the fact that they don’t require tenants to put up a deposit. Good for them!
Tenant Deposit Alternatives – Warranty Approaches
It’s worth knowing that some schemes exist that offer deposit free renting. These always involve the set-up of some kind of insurance or warranty policy with most schemes using a clause which allows them to legally pursue the third party, in this case, the tenant, to recover any claim for damage against the deposit or in some policies, any unpaid rent.
Firms behind these schemes say the claims process is quick for landlords with the added advantage for landlords that they can advertise a property as being “deposit free” – which will be attractive to many tenants too.
For example, FCC Paragon has been offering such a product, called “Smart Deposit” for many years. Their warranty covers damages as well as up to two months’ of unpaid rent.
And in February 2018, the portal, Zoopla, finally launched its Zero Deposit Scheme. To qualify tenants pay one weeks’ rent. This is non-refundable, however, so it is actually a sunk cost to the tenant. In addition, tenants also pay a £25 admin fee in each subsequent year. This scheme gives landlords the same amount of cover as a six weeks tenancy deposit (though there is no rent cover). Any disputes are sent to the dispute resolution firm, The Dispute Service. If they rule that the landlord is owed the money, they pay out promptly to the landlord and make a recovery from the tenant.
Of course, the downside for the tenant is the non-refundable one weeks’ rent cost plus the on-going annual admin fee – a real consideration when you think, that most tenants in the private rented sector actually get their deposits back in full anyway, with no deductions. That said, the Zoopla scheme does, of course, help tenants’ cash flow between tenancies, whilst they wait to get their earlier deposit back. So, clearly there is a trade-off for tenants here.
Remember, by law, all tenancy deposits have to be protected in an approved tenancy deposit scheme – and tenants must be given the details of the scheme in which their deposit is held. More information on this is in my book – details below!
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