You've located a property, completed the contract signing, and now it's time to fulfill the tenancy deposit, commonly referred to as a rental deposit.
Tenancy deposits play a crucial role in the rental procedure, serving as a safeguard that offers landlords a level of protection in case any damage happens to the property.
In this blog post, we will delve into the details of rental deposits, explaining what they entail, how they are safeguarded, and what steps to take if there are any complications in reclaiming it at the conclusion of your tenancy.
WHAT DOES A TENANCY DEPOSIT INVOLVE AND WHY IS IT REQUIRED?
A tenancy deposit is a financial amount submitted by tenants to landlords or letting agents to serve as a safeguard against potential damages, unpaid rent, or violations of the tenancy agreement. It functions as a protective measure for landlords, ensuring they have financial coverage for any unforeseen expenses that may arise during or after the tenancy period.
It's important to note that a tenancy deposit differs from a holding deposit, which is paid to temporarily reserve a property or remove it from the market while you finalize contractual paperwork.
However, if you've paid a holding deposit, this amount is typically subtracted from the overall rental deposit, and tenants are then responsible for settling the remaining balance.
HOW MUCH WILL I PAY AS A TENANCY DEPOSIT? Since the Tenant Fees Act 2019, deposits are now capped. This means that the maximum deposit you can legally be asked to pay is no more than 5 weeks’ 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’ rent is going to be, you take your monthly rent, multiply it by 12 to get an annual figure. Then divide by 52 to get a weekly amount and then multiply 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 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:
- Deposit Protection Service
- MyDeposits
- Tenancy Deposit Scheme
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 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 ABODE? When tenants rent through Abode, 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.