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Deposits

A dilapidation deposit is held against damage to the property during the tenants stay.  It is wise to take plenty of photographs of the property and an inventory of anything included in the rent before the tenant takes over.  Should there be a dispute when the deposit is returned these will be invaluable.  Generally this does not happen but you need to be ready for that unfortunate time when problems arise.

You do not have to take a deposit from a tenant but we would always advise you to do so.  If the tenant has their own money to loose they tend to be more careful with the property. 

Councils now offer bonds for their tenants so you will not receive a deposit and not have to join a deposit scheme.

As from 6th April 2007 new rules mean that landlords have to protect deposits in one of two ways.  Either by handing over the deposit to a scheme administrator or taking out an insurance policy from one of two companies. 

The basic rules are that you have to belong to one of these schemes if you take a deposit. If you do not then you will not be able to use the courts to get unwanted tenants out and you could receive a nasty fine.

The custodial scheme

You pay any deposit you receive over to the administrator who holds the money in trust.  It doesn't cost you anything.  At the end of the tenancy if you and your tenant agree as to how much deposit is to be returned to them and how much to you, the administrator will pay out accordingly.  If you do not agree then you can use the Alternative Dispute Resolution service, whose decision is final.  If you both cannot agree to use this service then you can go to the County Courts with the matter.  For more information visit the deposit protection site.

The insurance scheme

If using the insurance scheme you will be able to hold the deposit yourself.  You will still be able to use the Alternative Dispute Resolution service and the County Courts but will have to hand over the disputed amount to be held by the Alternative Dispute Resolution service until a decision is made.

While there is no cost when you use the custodial scheme there is with the insurance scheme.  There is a one off joining fee of £60 for a private landlord, with an annual fee of £15 and then each deposit insured costs £30 a time. These are rough figures for an accurate quote visit the deposit protection site.

When taking a deposit you must:

• Give your tenant details of what scheme you use within 14 days of taking that deposit

• Return the agreed amount of deposit to the tenant within 10 days of them leaving the property unless there is a dispute

If you take a deposit after 6th April 2007 and do not join one of the schemes your tenant can take you to court and you will be forced to pay the deposit back to them or put it into one of the schemes.  You are also likely to be fined an equivalent amount to three times the deposit.  This would be costly and a waste of your hard earned money so decide on what to do and be ready for it.