When signing a contract for a property, it is common that you will be required to pay a deposit. The amount for this can vary, but following the introduction of the Tenant Fees Act there are now limits on what can be charged! (See below)
What Are The Different Types of Deposits?
There are a number of different types of deposit a landlord can take, so it is important to know which is which and what they mean.
Holding Deposit – A holding deposit is an amount of money paid to the landlord to reserve a property. The Agent / Landlord should be clear about why they are requesting a holding deposit which should include the amount and the circumstances where you may lose all or part of this deposit. It's best to get this information in writing prior to handing over any money to avoid issues later on. The holding deposit will either be returned to you on taking up your tenancy, used against a portion of rent or transferred to become a full or partial security deposit. If this is the case, the security deposit rules apply from the date you take residence. This is capped at one weeks rent by law.
Tenancy Deposit (Often reffered to as a Damage / Security Deposit) – A tenancy deposit is money taken to cover any potential damage to the property or loss of rent to the landlord during your tenancy. It will be returned to you if you leave the property in a good condition and have paid all of your rent and bills. This type of deposit must be protected within 30 days of the landlord or agent receiving the money if you have signed an Assured Shorthold Tenancy Agreement. This is capped at five weeks rent by law.
Any other fees such as booking, inventory, referencing are now prohibited under the Tenant Fees Act.
Did Anyone Give You The Money For Your Deposit?
Your landlord is required to name everyone that contributed to the deposit, and provide each person with the information regarding which scheme the deposit is protected with. If anyone helps you pay the deposit, you will need to advise the landlord. This could include your parents lending you £50 towards it or a friend covering you until you get your loan. If all or even some of it isn’t your money you should declare it.
What are The Different Types of Tenancy Deposit Schemes?
There are two different types of schemes, both of which are backed by the government. These are called custodial and insurance. Both types of scheme are provided by three providers. You can find their details a little bit further down.
Under a custodial tenancy deposit scheme, the money that is paid as a deposit to the landlord will be held by the provider of the tenancy deposit scheme for the duration of the tenancy agreement. The provider will release the funds to the named person once both the landlord/agent and tenant have agreed a settlement. If you cannot agree, the undisputed funds will be released to the tenant and the disputed amount retained by the scheme until the dispute is resolved.
Under an insurance tenancy deposit scheme, the money that is paid as a deposit to the landlord will be held by the landlord for the duration of the tenancy agreement and insured by the relevant tenancy deposit scheme. If the landlord/agent and tenant agree on the settlement amount, the landlord/agent will provide the tenant with the funds directly. If, however, there is a dispute, either party can advise the operators of the scheme and the landlord/agent will be required to send the disputed funds to them until the settlement is resolved.
The three different providers are:
What Does My Landlord Need to Do?
Where a security deposit is taken for an assured shorthold tenancy agreement, the money will be held to cover any damage or loss to the property. The landlord will either hold on to the money which is insured by a third party or the money will be held by a third party.
Your landlord must protect your security deposit within 30 days and will be required to send you the prescribed information. This will contain your name, the landlord’s name, the address of the property, the scheme details and the amount of the deposit paid among other things. More information can be found here.
What Can My Landlord Use the Money For?
The landlord is usually able to use the money for any outstanding issues at the end of your tenancy agreement if it is specified in your contract, for instance, this could be unpaid rent at the end of the tenancy, broken items, damaged walls, cleaning costs etc.
The landlord will usually advise you how much they are deducting (if anything) once they have inspected the property following the end of your tenancy. If you do not agree, you can try and resolve this directly with the landlord or if required using the free dispute service provided by the scheme your deposit is protected with.
If you want your deposit back, the best thing you can do is to look after your accommodation. Whilst you are living there, ensure that it is kept clean, tidy and well ventilated, and if you are making any alterations to the property – even if it’s only putting a poster on the wall – make sure you have permission from the landlord or agent in writing first.