Tenancy Deposits – The Ins and Outs
If you’re renting a property, before you move in you will be expected to pay a deposit – usually called a Dilapidations Deposit. This article explains everything you need to know about it:
What is it and why is it required?
It’s a sum of money – usually 6 week’s rent – which is payable prior to the start of the tenancy. It is required as a safeguard for the landlord to protect him against any dilapidations (defects or disrepair) which you as tenant will be required to deal with or pay to have remedied when you vacate the premises. It is refundable at the end of the term, minus any appropriate deductions – we’ll go into the deductions process a bit later.
Where does your money go?
If your tenancy is an Assured Shorthold Tenancy (under £100K per year);
Your landlord/agent will need to register the deposit in one of the three approved schemes. These schemes guarantee that tenants will get their deposits back at the end of the tenancy, if they meet the terms of the tenancy agreement and do not damage the property. If any other scheme is used, deposits are not protected in law. The three approved schemes are:
- Deposit Protection Service (DPS)
- Tenancy Deposit Scheme (TDS)
If your landlord does not register your deposit when required, you can take him to court forcing repayment plus a fine of up to three times the amount.
Tenancy deposit schemes do not cover holding deposits though. It is usual for Tenants to pay a holding deposit before they have signed a rental agreement, in order to secure the property and remove it from the market. This sum is usually deducted from the initial monies paid at the outset.
Any other tenancy;
Your deposit will usually be held by the Agent in a stakeholder capacity during the Tenancy in case the Tenant fails to comply with the terms of the Agreement and to protect the landlord against any damage to his property whilst it is tenanted. It is released (minus any deductions) at the end of the tenancy. You should never, under any circumstances permit the landlord to hold your deposit, even in a stakeholder capacity!
How can deductions be made and for what?
Whatever your type of tenancy, the deposit remains the tenants’ money at all times during the tenancy and should not be used to subsidise either the landlord’s or the agent’s outgoings or expenditure other than by specific mutual agreement (with the tenant) or by express provision of a clause in the tenancy agreement. Basically, there should be nothing deducted from your deposit without your prior notification, or written agreement (depending on which scheme it’s being held in, or what it states in your contract if your tenancy is not an Assured Shorthold Tenancy).
Before you move in, an inventory check will take place. This will establish the condition of the property and provide a detailed description of any existing defects or damage including the condition of the décor, whether it is newly done or if there are existing defects. You will be sent a copy of this report and asked to sign your agreement to it when you move in. At the end of the tenancy, a similar check will take place. Both reports are then scrutinised and compared, and a list of dilapidations is produced.
The most important thing to remember is that a dilapidations deposit cannot be treated like a ‘new for old’ insurance policy. If landlords could replace items like that, it would be betterment at the tenants’ expense, which is considered unreasonable. With the same principle in mind, the replacement cost for missing items would usually be based on their second hand value at the end of a tenancy. Above all, allowances must be made for fair wear and tear. The length of a tenancy and the age of the missing or damaged item need to be considered as do the quality, condition and reasonable life expectancy at the beginning of the tenancy. This emphasises the need for an inventory report at the outset.
So – make sure there is a careful process but don’t forget if the landlord wants to make any deductions, the ownness is on him/her to prove that any damage has been caused during the term of the tenancy. If he hasn’t got an inventory report from the check-in this is impossible.