Can I Avoid Tenancy Deposit Schemes by Asking for More Rent In Advance?

I’m going to be writing a few articles about tenancy deposit schemes in the next few weeks here on the blog.
Just as a reminder first, all NEW assured shorthold tenancies which started after 6th April 2007 in England and Wales where a landlord takes a deposit should have the deposit protected in one of the three tenancy deposit schemes the government has set up. There are fines for not complying and you cannot evict under the so called accelerated possession route.
There is lots more about this in “Successful Property Letting – How to Make Money in Buy to Let” and on the net.
Now lots of landlords have asked me, "Can I not just take two months rent in advance instead of one month and not bother with protecting the deposit in the scheme?"
Well, the answer is yes. There is nothing wrong with doing this. In effect, the tenant will pay over the same amount of money at the start.
However, the big difference is that a landlord won’t be protected against damage in the same way as he would if he had taken a damage deposit. This is because the money paid by the tenant would have been rent and as such, cannot be used to deal with damage disputes or disputes or about what was in the inventory etc.
So, in this scenario, in a six month or 12 month tenancy the tenants will just pay no rent in the last two months because they don’t have to – as it has already been paid in advance.
But if they leave the property in a mess or have lost items that were on the inventory, then the landlord will have no money to cover the losses.
So, whilst a landlord doing this has done nothing wrong, he does significantly increase the risk that the tenants will leave the property in a mess because they have no risk of losing their damage deposit hanging over them when they leave.
Deposit schemes are quite complex. If you need detailed advice on tenancy deposit schemes or landlord and tenant problems generally ask me.
I’m David Lawrenson from property investment advisors www.lettingFocus.com
I’m the author of the UK's top selling property investment book
I’m a speaker on property investment issues and a freelance property writer and I contribute to newspapers and a host of property websites, write a property investment blog and run a landlord mentoring service
You can read more of my landlord blog and details of my networking, advice, property mentoring programme at my website www.lettingfocus.com.
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Copyright: David Lawrenson 2007. This blog is updated at least twice a week

Insurance Schemes That Claim to Get Around Tenancy Deposit Schemes - And Why They Won't Work

A colleague at landlordzone.co.uk drew my attention to a scheme that aims to avoid the tenancy deposit schemes (TDS) by having the tenant effectively insure against the rent and damage.
Basically it involves the tenant completing a form and paying a premium under which you the landlord gets cover against rent non payment and damages.
There is a big problem though with these schemes.
The main doubt I have is that the tenant would have to be a very good one to get on the scheme in the first place.
Most of my tenants are from overseas or they are young – in both cases I know from their credit scores that they have limited credit records which would disbar them from any rent guarantee schemes as their credit score would be too low for them to qualify.
However, having a lowish credit score does not a bad tenant make!! (I do other checks on them which confirm whether they are a safe bet or not.)
If I had to wait to get a tenant whose score is high enough to qualify for an insurance policy to cover non payment of rent or agaisnt damages, I’d be waiting a very long time for a tenant!
Copyright David Lawrenson 2007. Back to main site: www.lettingfocus.com

Tenancy Deposit Schemes

Yes, they are here now.
And yet, I was surprised to see how little there was in the weekend papers on them.
If you have been confused by some of the reporting on them, here is just a few things to get straight.
They ONLY apply for NEW Assured Shorthold tenancy agreements dated on or after 6th April.
They DO NOT apply to existing tenancy agreements which were set up before 6th April where the agreements is already (or will in future) simply be extended to become a monthly periodic agreement.
They DO NOT apply YET in Scotland or Northern Ireland.
They DO NOT apply to other agreements other than assured shorthold ones. So, you could try an assured tenancy and not have to bother with putting a deposit in a scheme, but with an asured tenancy, you won't be able to get the tenant out unless he defaults or is in any other way in breach of the tenancy agreement.
Oh and finally, those bad landlords who make a point of never returning deposits - and who the schemes are supposed to stop - will ignore it anyway and use all their various nasty trcks to coerce and bully tenants into not reporting them for not being in the scheme.
So, the whole thing is a waste of time really.
Copyright: www.lettingfocus.com and David Lawrenson