Tenancy Deposits and Tenancy Deposit Schemes
David Lawrenson of www.LettingFocus.com prefers tenancy deposit schemes where a landlord does not have to hand over the cash.
Since April 2007, landlords letting property in England and Wales and who take a deposit on an assured shorthold tenancy (AST) must protect it in a tenancy deposit scheme, tell the tenants which scheme it is in and give them the necessary “proscribed information”.
All this must be done within 30 days of taking the deposit.
In England and Wales you can either choose a “free to use scheme” in which you have to hand the deposit money over to an administrator or you can opt for one of two “insurance based schemes” – where you pay a one off fee, which is currently £30 for the MyDeposits scheme.
We much prefer the insurance based schemes like MyDeposits – because in these the landlord gets to hold onto the deposit (unless there is a dispute, in which case the disputed amount must be paid over to the scheme administrators pending resolution). And, if you hold the cash, the insurance based schemes also allow the landlord to potentially earn interest on the deposit monies too.
Of course there are rules. In insurance based schemes, like MyDeposits, the landlord does not need a ring fenced client account, but landlord members must:
1) keep the money in a UK bank account as a minimum
2) if they are a member of an approved or trade body, hold the deposit is accordance with their rules on accounting requirements, subject to minimum above
3) own the property (jointly is fine) for the deposit they wish to register
4) be named as the landlord on the assured shorthold tenancy agreement and ensure the TA matches the deposit certificate. (For agents and corporate landlords, different rules apply and a ring fenced client account is a must).
The free (custodial scheme) operates quite differently – it pays for itself partly from interest on the deposits it takes in from landlords.
Do the Maths
Landlords should do the maths!
Even at just a 3% interest rate, if the deposit is a fairly typical £1,000, then you only need a years worth of interest for the insurance based schemes to earn back the one off £30 fee and start to look like the better deal.
Landlords opting for the insurance based schemes should ideally make it clear on the assured shorthold tenancy agreement that they, the landlord, will keep any interest earned on the deposit monies.
But what I really like about the insurance based schemes is that they are fairly easy to use. At the end of the tenancy, providing there is no dispute over the deposit, then you just hand the agreed deposit back to the tenant (in full or with any deductions as agreed with the tenant) and simply go online to the scheme administrators’ site and tick a box to “unprotect” that deposit.
There is no fiddly need to request the funds back from the scheme administrator.
It seems the simpler way of doing things to me.
(In Scotland things are different – here there is no insurance based tenancy deposit scheme. Only custodial schemes where landlords have to hand over the deposit at the outset are available).
Housing Benefit Tenants – A Different Ball Game
Of course, tenants who are on LHA / Housing Benefit will often not have deposits. Sometimes a local authority will offer to cover the deposit instead – but they will always hold onto the money, so no possibility of landlords earning interest on it here!
And claiming against these local authority schemes can be hard work and take time – another reason why many landlords, will avoid this end of the tenant market if they have a choice.
Services to Businesses and the Public Sector
We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. We also write for property portals, speak at property events and we are regularly quoted by the media.
Services for Private Landlords
We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.
HOME PAGE OF THIS BLOG click here: Blog
To read blog posts on related posts use the tags and categories at the bottom of each post (after the list of links), or over to the right of this page – where, you can click on “Select Categories” and use the pull down menu to read all the posts on any Category that interests you.
THE HOME PAGE OF THE MAIN SITE
For our main home page click here: http://www.LettingFocus.com
For general information on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press please click: Consultancy and Seminars
For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Advice
TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING”
Our book is the highest selling property book in the UK. Click here to Find Out More and Buy it at Amazon. If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates.
TO JOIN OUR FREE NEWSLETTER and get our latest Newsletter which goes to over 3,000 people (as at December 2011) just send an email to david@LettingFocus.com
We do not spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.
OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS click here: Landlords Resources
Please note we only allow selected advertisers to market their services.
PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here
NEXT SEMINAR EVENT FOR LANDLORDS: Landlord and Property Letting Seminar
Copyright of Blog: David Lawrenson 2012. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated once a week.
TWITTER PAGE For my thoughts on property, personal finance, plus a lot of other random things from sport, to 80s and 90s Indy Music, to tsunamis to musings on boardroom pay, plus my (usually) slightly centre left “take” on UK and world politics please see our Twitter page.
LINK TO THIS BLOG OR TO OUR WEBSITE