Whether you’re saying goodbye to your new best friend or celebrating seeing the back of a troublesome rogue, you should always oversee the tenant check out professionally. You need to ascertain whether the property is in an acceptable state and, if not, how much of the deposit should be kept. If you produced a thorough inventory at the start of the tenancy then the check out should be fairly straightforward. Continue reading
At Homeless Link’s annual conference in Hinckley (8th July), Richard Lambert commented on the fact that private landlords viewed renting to the homeless ‘as too much of a risk’.
He went on to say that ‘very few landlords’ start letting with the intention ‘of providing social services’ to vulnerable tenants. Furthermore, he also strongly stated that ‘homeless agencies must be able to provide the assurances and safeguards for the landlords’, and therefore meaning the landlords, as well as the tenant’s needs must be taken into account.
Finally, he also suggested that landlords might be more open to the idea of renting to homeless people if charities were able to offer deposit bonds to reduce the financial risk and provide better support and training, as well as more in-depth tenant referencing.
What is it?
A holding deposit is taken by a landlord in exchange for ‘holding’ a property off the market for a prospective tenant. Unlike a security deposit, it does not need to be protected by a deposit protection scheme. It’s an act of good faith on the part of the applicant to show that they are serious about renting the property. In exchange, you, as the landlord, will probably be expected to:
- Inform other prospective tenants that a holding deposit has been paid and so, in effect, the property has been taken, though you should also point out no tenancy agreement has been signed so the deal could fall through…
- Stop advertising the property
From your own point of view, once the holding deposit has been paid you should prepare for the start of the tenancy:
- Conduct your credit and reference checks
- Prepare your tenancy agreement
- Prepare a full and comprehensive inventory
- Make sure your gas-safety certificate (CP-12) and Energy Performance Certificate (EPC) are up-to-date, if you have not done so
When should I ask for a holding deposit?
Obviously it’s wise to get a holding deposit wherever possible as it commits the applicant to the property. It’s particularly desirable when demand for the property is healthy and any delays by the applicant could cause other prospective tenants to lose patience and interest.
How much should I take?
It should be an appropriate amount taking into account the losses you would expect to make if the deal falls through. One week’s rent is typical.
Should I keep it or return it?
As long as it’s detailed in writing when the deposit is taken (along with a receipt), you have every right to keep the deposit if the prospective tenant pulls out as it’s just recompense for the inconvenience and costs. Unfortunately, if the tenant fails reference or credit checks, you must return the deposit as by law you are the one declining the contract. If everything goes swimmingly and the prospective tenant becomes your actual tenant, you have the following options:
1.) Return the deposit
2.) Incorporate the deposit into the first rent payment(s)
3.) Incorporate the holding deposit into the security deposit (any security deposit must by law be protected in a deposit protection scheme, now available through Rentify!)
As a landlord, you’ll know about the statutory tenancy deposit scheme. But did you know that it could now apply to leases signed before 2007?
This follows a new high court ruling that states that periodic tenancies also come under the scheme. Periodic tenancies are created when a fixed-term tenancy comes to an end but the tenant continues to live at the property on a rolling month-by-month basis.
The court decided that when this happens, it is not an extension of the old contract, but a new one. This means that the tenant is effectively re-submitting the deposit. So it now comes under the statutory tenancy deposit scheme.
Due to the ruling, hundreds of landlords may have been breaking the law since the new regulations came into force in 2007. To make sure this isn’t you, you should take a look at all your tenancies and make sure you’re holding the deposits for them correctly. Pay particular attention to those created before 2007 that may have expired and may now come under the deposit scheme.
If your tenancies come under the statutory deposit scheme, you should:
- Ring-fence any deposits taken from tenants
- Place them in an approved statutory deposit scheme within 30 days of receipt
- Provide tenants with information on the scheme you have chosen.
A report released after the ruling noted that a number of landlords often forget to comply with the above steps, or are simply unaware that they are required to do so.
If you don’t comply, you could be breaking the law. To ensure you don’t do this, why not take a look at our property management service? We can collect your deposits and ensure they are placed in a suitable scheme, so you can sit back and relax while we do the hard work for you.
We also offer our own deposit protection scheme for landlords. You can find out more about this and any of our other property management services by dropping an email to our team at firstname.lastname@example.org.