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Providing that it is stipulated in the tenancy agreement, a deposit can be withheld to cover any loss incurred by the landlord that is caused by the tenant, such as damage to the property or non-payment of rent.
Since 6th April 2007, it has been a legal requirement for landlords who rent a property on an assured shorthold tenancy to protect any deposit taken within 30 days of receipt. The tenant must also be served with the prescribed information and a copy of the deposit scheme leaflet. If the deposit has been paid by a third party, they must also be provided with the statutory notice and associated documents.
If your tenancy is not an assured shorthold, you don’t need to protect the deposit.
The deposit must be protected in a government-backed tenancy deposit scheme (TDP). In England and Wales the deposit can be registered with:
Deposit Protection Service, DPS (who offer both a custodial and insured scheme)
MyDeposits (who offer an insured scheme only) and the Tenancy Deposit Scheme
Tenancy Deposit Scheme, TDS (who offer both a custodial and insured scheme)
Scotland and Northern Ireland have separate tenancy deposit schemes.
The penalty for not protecting the deposit correctly can range from the deposit amount to three times the deposit amount (and can also include the deposit amount on top!).
You will also be unable to serve a valid section 21 notice.
To avoid issues with the deposit, it’s always a good idea to give your tenants an indication of what you will be expecting from them at the end of the tenancy. We recommend that you refer your tenant’s back to the tenancy agreement and the inventory, so that they can be reminded of any particular requirements, such as end of tenancy cleaning, repairing damage etc.
On the final day of the tenancy, at the agreed time, you or your inventory clerk should meet with the tenants to complete the check out report and take final meter readings. If you are unable to meet with your tenants, you should attend the property as soon as possible after the tenancy has ended.
Once your final inspection has been completed, you should act promptly to either repay the deposit or obtain quotes for repairs/cleaning.
The deposit must be returned within 10 days of agreement as to how much is to be refunded.
If there are deductions to be made, it’s best to try to agree on these first, as the arbitration can be onerous and lengthy.
If you cannot agree on the deductions, the matter can be referred back to the deposit scheme who offer a free of charge arbitration service. Alternatively, both parties may opt to pursue the matter via the county court (where court fees will apply). Once both parties have agreed to use the deposit scheme arbitration service, each will be asked to provide evidence to support their claim. The arbitrator makes a decision based on that evidence. There is no appeal and their decision is final.
Your best chance to win any deposit dispute is to have a good quality tenancy agreement, a thorough and robust inventory completed by a qualified inventory clerk and well maintained paperwork (communications with tenants, receipts, interim inspection reports, check out report etc).
If you are unsure how to protect the deposit, we can organise this for you. Click here to find out more. We can also complete your inventory, interim inspections and check out report.