All landlords of HMOs in England and Wales – as well as other forms of short assured tenancies (ASTs) - are required to register their tenants’ deposits in a government-approved scheme.
This has been the case for a number of years now and it’s been designed to protect both the landlord and the tenant following some lengthy and expensive court cases – not to mention unsavoury practices amongst landlords and unhappy tenants.
In an ideal situation (which is why the law was introduced) the tenant receives their deposit back once the tenancy has ended and both parties are happy with the duration of the tenancy and the condition of the property. This should be within 10 days.
Generally it is considered reasonable for a landlord to deduct money from the tenant’s deposit in the event of damage to the furniture or the fabric of the property itself and missing items (which were listed in the inventory taken at the start of the tenancy and agreed by both parties). What is considered unreasonable deductions are standard wear and tear of fixtures and fittings.
The schemes vary depending on where in the UK the tenancy is. For instance both Scotland and Northern Ireland have their own accredited bodies. Their schemes were also introduced far later than in England and Wales.
Government regulations surrounding tenancy deposits
There are a number of regulations which have to be adhered to after you, as a landlord, have collected your tenant’s deposit. For instance, it has to be put into an approved scheme within 30 days of the tenant handing it over. He or she should also be given information as to where you have invested it within that same time period.
It’s essential you do this because otherwise the tenant could take you to court where you could face a fine of up to three times the deposit amount. Not only that, but you won’t be able to legally get possession of your property again until that deposit is in an approved scheme.
The deposit itself can be in the form of cash, a cheque, bank transfer, a credit card payment, money order or postal order. It can’t be in the form of goods to the value of the deposit.
There are three approved tenancy deposit schemes in England and Wales to choose from and the decision is the landlord’s rather than the tenants. The three government-approved schemes currently in existence are:
Approved Tenancy Deposit Schemes – England/Wales
It’s worth noting that all three schemes offers an alternative dispute resolution service which is advertised as impartial (ie it favours neither the landlord or tenant). This ensures that any disagreements between how much money a tenant should receive at the end of their tenancy is decided fairly and without having to resort to court and expensive solicitor fees.
Despite this, some tenants and landlords do prefer to go to court and they are perfectly free to do so since the ADR scheme isn’t mandatory. It must however, be used within a certain time period.
Some local authorities in England and Wales operate their own form of a tenancy deposit scheme. These work in two ways. The first is where the landlord is paid cash on behalf of the tenant. The second involves no money changing hands but simply a letter of guarantee written by the tenant.
You can find out more information about the Tenancy Deposit Schemes mentioned above, or advice about letting in general – particularly HMOs – from the popular Oxford-based company Property Go-To Girl.
I'm Jacquie the Property Go-To Girl. I am passionate about property. I love to help people make the most out of their property investments!