What is a tenancy deposit and why do you need to protect it?
While it is not a legal requirement to take a deposit, if you do take one and it is not protected there may be serious consequences
A tenancy deposit (sometimes called a security deposit) is money that the landlord or agent can request from the tenant before they move into a property. It offers landlords protection against:
unpaid rent or bills
property damage
missing items listed in the inventory
If you’re letting a property under an assured shorthold tenancy (AST) or Welsh occupation contract, and you take a deposit, you’re legally required to protect it with a government-approved scheme like mydeposits for the length of the tenancy.
Tenancy deposit protection legislation was included in the Housing Act 2004. It became compulsory for deposits taken in relation to an assured shorthold tenancy after 6 April 2007 to be protected with a government-approved tenancy deposit (TDP) scheme.
You also need to serve the correct prescribed information to the tenant within 30 days of receiving the money. At the end of the tenancy the money should be refunded to the tenant after they have left, minus any reasonable proposed settlements made by the landlord relating to unpaid rent or damage. If a landlord wishes to propose a settlement from the deposit when the tenancy ends, they must be able to prove, with evidence, that the claim is reasonable.
While most tenants look after their rental homes responsibly, deposit protection helps to resolve issues on the rare occasions when something goes wrong.
“While some landlords choose not to take a deposit, which is fine, it is a legal requirement to protect it if you do, and protecting it must be done properly. By not following the proper procedure or not protecting it at all, you risk more than just lost income. You may face legal action, lose the right to evict your tenant using Section 21 and have to repay the deposit and up to three times the amount as compensation.”
What is the maximum deposit amount?
Under the Tenant Fees Act there is a cap on the deposit amount that can be taken depending on the annual rent:
No more than five weeks’ rent where the total annual rent is less than £50,000
No more than six weeks’ rent where the total annual rent is £50,000 or more
Tip: To calculate a week’s rent, multiply the monthly rent by 12 and divide by 52.
I always take a deposit or use an alternative
I usually take a deposit or use an alternative
I never take a deposit or use an alternative
