EVERYTHING YOU NEED TO KNOW ABOUT TENANCY DEPOSITS
EVERYTHING YOU NEED TO KNOW ABOUT TENANCY DEPOSITS
So, you’ve found a property, signed a contract and now you need to pay the tenancy deposit also known as a rental deposit.
Tenancy deposits are a critical part of the renting process, acting as a security which provides landlords with protections should any damage occur to the property.
In this blog we’ll look at the ins and outs of rental deposits, what they are, how they are protected and what to do it if you have any issues in receiving it back at the end of a tenancy.
WHAT IS A TENANCY DEPOSIT AND WHY IS IT NEEDED?
A tenancy deposit is a sum of money paid by tenants to landlords or letting agents as security against any potential damages, unpaid rent, or breaches of the tenancy agreement. It acts as a form of protection for the landlord, ensuring that they have funds to cover any unforeseen expenses during or after the tenancy period.
A tenancy deposit is different to a holding deposit, which is paid to ‘hold’ a property or take it off the market whilst you sort out the contractual paperwork.
However, if you have paid a holding deposit this is usually then deducted from the rental deposit and tenants just pay the remaining balance. This is what we do in most circumstances at Smart Lettings.
HOW MUCH WILL I PAY AS A TENANCY DEPOSIT?
Since the Tenant Fees Act 2019 (*England Only) deposits are now capped. This means that the maximum deposit you can legally be asked to pay is no more than 5 weeks’ of rent. (This applies when your total annual rent is less than £50,000).
The deposit always remains the tenant’s property. It is just being held by the landlord or letting agent. There is a legal requirement for the landlord or letting agent to protect your money and there are three schemes to choose from.
HOW DO I CALCULATE MY TENANCY DEPOSIT AMOUNT?
To work out how much 5 weeks’ of rent is going to be, you take your monthly rent, times it by 12 to get an annual figure. Then divide by 52 to get a weekly amount and then times by 5.
(Monthly rent x 12 months) ÷ 52 weeks = one week’s rent
Example calculation:
£1,200 x 12 = £14,400
£14,400 ÷ 52 = £276.92
£276.92 x 5 = £1,384.60
WHAT ARE THE DIFFERENT PROTECTION SCHEMES?
In England and Wales, landlords and letting agents are legally required to register a tenant’s deposit. This ensures that the tenant’s money is protected and that they can reclaim it at the end of their tenancy, assuming they have met the terms of their rental agreement and left the property in good condition.
There are three government-approved Tenancy Deposit Protection schemes (TDP) in England and Wales. (Scotland and Northern Ireland have their own schemes.)
The schemes are:
All the TDP schemes offer 2 options for how the money is kept.
Custodial – The deposit money is put into the scheme for the duration of the tenancy and is then released once the tenant moves out – or any issues have been agreed.
Insurance – based – The deposit money is retained by the landlord or letting agent in a separate deposit account and they pay an insurance policy to protect the amount.
All deposits should be registered with an approved scheme within 30 days of it being received. Landlords or agents should then give tenants details of the chosen scheme.
HOW AND WHEN DO I GET MY DEPOSIT BACK?
At the end of a tenancy, assuming there are no damages, rent owing or other breaches of the tenancy contract, the landlord should return the deposit to the tenant. Landlords or agents should return deposits within 10 days of agreeing with the tenant how much they will get back.
WHY MIGHT DEDUCTIONS BE MADE TO MY TENANCY DEPOSIT?
The landlord may make deductions from the tenancy deposit for things like, outstanding rent, missing items, damage that isn’t ‘fair wear and tear’, outstanding bills or other breaches to the rental contract. However, these deductions must be reasonable and supported by evidence.
Before making any deductions, the landlord must provide a list of the costs involved and give the tenant an opportunity to dispute or negotiate.
Here at Abode, we find that the most common reason for a deduction being made is that a property hasn’t been cleaned properly. Our advice would be to make sure you leave some time to thoroughly clean the house. It always takes longer than you think. Once all your items are out of the property, do one more final clean so that things are left ‘very clean’.
WHAT HAPPENS IF A DISPUTE IS RAISED?
If a landlord and tenant cannot reach an agreement they can use the dispute service which is available within each TDP scheme.
An impartial adjudicator will be allocated to the case and will make a decision based on all the evidence, 28 days after the deadline for submitting evidence.
The disputed amount of deposit will be transferred to the Tenancy Deposit Protection scheme. In the meantime, any undisputed amount should be paid back to the tenant.
HOW CAN I AVOID DEPOSIT DISPUTES?
There are a few things tenants can do which might help improve the relationship with your landlord and avoid them needing to deduct an amount from your deposit. They include:
- Checking the inventory at the beginning of your tenancy to ensure it is accurate.
- Taking pictures when you move in of the condition you find your property in.
- Keeping the property clean and tidy so that wear and tear is kept to a minimum.
- Contacting your landlord as soon as maintenance issues arise.
- Building a good relationship with your landlord by communicating regularly and openly.
WHY RENT THROUGH SMART LETTINGS?
When tenants/contract holders rent through Smart Lettings, an accredited ARLA agent, they have peace of mind that their deposits are legally protected and that any disputes will be handled fairly and impartially.
For Landlords, the process of collecting, protecting, returning and potentially deducting from deposits is complex. Abode staff are fully trained and can help and advise you through the different schemes to ensure you are legally compliant as well as manage all the communication with the tenant.
Contact our team if you have any further queries about deposits and deposit schemes or renting through Smart Lettings by calling 01656657033 or email info@smart-lettings.co.uk.
