How to return part of the deposit?

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  • Pergola
    started a topic How to return part of the deposit?

    How to return part of the deposit?

    Tenants provided deposit equivalent to 6 weeks rent which was registered with the DPS. Tenancy ends in July, tenants want to renew. My understanding is that after June 01, the deposit cannot exceed 5 weeks rent so I have to return to tenants part of the deposit.

    DPS says they cannot release part of the deposit, only the full amount and if I want to retain most of the deposit, I'd have to make a claim for it and then reregister it once my claim was approved and I'd received the funds. However, there would be a short window when the tenants would be in the property and the deposit would be unprotected - not ideal. Other option is to return it in full to the tenants and rely on them to then send the funds to me to be reregistered. Also not ideal as tenants already occupy the property. What do you advise?

    On a separate note, this will be my first renewal. How do I ensure that the initial inventory can later be relied on at the end of the renewed tenancy and that the DPS don't consider it an unrelated document. Should my renewal lease make clear the property should be left in the condition set out in the earlier inventory (W&T excluded)?

    Thanks

  • AndrewDod
    replied
    Obviously if you reduce the deposit you are going to increase the rent in accordance with the increased risk. Or better still, increase the rent by 1/6th to match the deposit......

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  • Jon66
    replied
    True but i granted a new lease for 5 months as it then ended 1st April a couple of weeks before i leave for the summer so i can control when the void is. But of course it depends on the type of tenant you have and their reasonableness.

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  • DPT57
    replied
    Originally posted by Jon66 View Post
    Some ll prefer not to have a tenancy ending at particular times for reasons such as not being in the uk during the school holidays, not wanting a tenancy to end nov/dec as the potential for a longer void is there, etc etc
    That would only happen if the tenant gives notice and if that's their intention they wont want to sign a new contract.

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  • Kape65
    replied
    If as you say, they are excellent tenants then just refund the deposit and don't accept a new one for the new tenancy.

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  • Jon66
    replied
    Some ll prefer not to have a tenancy ending at particular times for reasons such as not being in the uk during the school holidays, not wanting a tenancy to end nov/dec as the potential for a longer void is there, etc etc

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  • DPT57
    replied
    Originally posted by Pergola View Post
    ...both myself and the tenants would prefer the long-term stability of a new lease.
    In practice that means stability for them, not you. If their circumstances change and they wish to leave what are you going to do? Force them to pay for the remainder of the term? Periodic tenancies are just as stable if the intent is for a long term let. Plenty of people on here have long term tenants on periodic tenancies. It would save you a lot of hassle.

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  • KTC
    replied
    Originally posted by Pergola View Post
    Won't the rationale of Superstrike mean that the deposit will be deemed to have been returned and then repaid, meaning allowing it to lapse into a periodic is problematic if the initial deposit was above 5 weeks rent?
    (2) Subject as follows, section 1 does not apply to a requirement imposed by or pursuant to an agreement relating to a periodic tenancy which arises—

    ....(a) under section 5(2) of the Housing Act 1988 after the coming into force of section 1, and

    ....(b) on the coming to an end of a fixed term tenancy which was entered into before the coming into force of that section,

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  • Pergola
    replied
    Originally posted by theartfullodger View Post
    Oh gawd think I'll top meeself...

    Do nothing, don't renew, just continue as perioidic, more flexibility to evict for landlord.
    Won't the rationale of Superstrike mean that the deposit will be deemed to have been returned and then repaid, meaning allowing it to lapse into a periodic is problematic if the initial deposit was above 5 weeks rent?

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  • MdeB
    replied
    Originally posted by Pergola View Post
    That's why I was wondering whether if I should include in the lease #2 that the property must be returned in its condition at the time of the start of lease #1 as shown in the inventory.
    I put a statement in a new agreement to the effect that LL and T agree that the inventory dated <date> is the condition of the property when the tenant took possession and wear and tear is to be calculated from that date.

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  • Pergola
    replied
    Originally posted by jpkeates View Post
    The constraints on the value of a deposit don't affect existing leases.
    There is no need (or indeed mechanism) to do that.

    The inventory/condition report is simply a document recording the condition at the start of the lease.
    Unless the renewal agreement specifically mentions it, there's no need to make reference to it.

    For the avoidance doubt, there's no actual need to renew anything, the lease continues anyway (unless the tenant moves out before the end of the fixed term).
    Tenants want a new lease to run consecutively with their current one. They're excellent tenants, and notwithstanding theartfullodger's advice to let the tenancy continue as periodic, both myself and the tenants would prefer the long-term stability of a new lease.

    Based on the advice received, I'm going to try and return the deposit but make a claim on it for 5 weeks rent which will be reregistered as a deposit for the second tenancy. Although tenants could theoretically argue this is money from the original deposit and once DPS pay it to me, it is unprotected, as tenants have to approve my claim, I doubt it'd still be considered part of the first deposit and therefore I'll have another 30 days to protect it and issue PI.

    My concern with the inventory is that at the end of the second tenancy, the tenants and the DPS may argue the original inventory is useless as it relates to the previously concluded first tenancy for which no claim was made at the time, and that to make a claim at the end of the second tenancy, I need to be able to evidence the property's condition at the start of that specific tenancy.

    That's why I was wondering whether if I should include in the lease #2 that the property must be returned in its condition at the time of the start of lease #1 as shown in the inventory.

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  • MdeB
    replied
    S1.(1) says "A landlord must not require a relevant person to make a prohibited payment to the landlord in connection with a tenancy of housing in England."

    Therefore it seems to me that all that is required is for the new agreement to require a deposit of 5 weeks' rent or less. The fact that the tenant paid more does not contravene S1.(1).

    However, if T requires LL to repay the excess and the deposit is in a custodial scheme that does not allow partial refunds to T without balance to LL, then it appears that the only way it can be done without having an unprotected deposit is for the LL to protect the new (reduced) deposit and then claim that money from the original deposit.

    It is interesting that the 2004 Act appears not to require that a deposit is continuously protected but does allow (S214.(1)(b)) a penalty to be sought if it is not.

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  • KTC
    replied
    Originally posted by jpkeates View Post
    A deposit at the start of the lease is a requirement imposed before the coming into force of that section (which looks like June 1st 2019).
    Even though the tenancy is a new tenancy and the deposit is received again, the value of the deposit must be "a requirement imposed before the coming into force of that section".

    ...

    On the other hand, I get the feeling that any rational interpretation is likely to go all superstrikey at some point.
    The prohibition are worded "in connection with a tenancy", so it has to be considered in that context. A deposit is deemed returned and repaid for the new tenancy. Borrowing words directly from Superstrike judgment, "it must been the landlord's position, that it held the sum of £.. as a deposit as security for the performance of the tenant's obligations, or for the discharge of any liability of the tenant, arising under or in connection with the new tenancy". So the amount in relation to the new tenancy has to be considered to have been imposed at the time of granting the new tenancy.

    Just return the differences if it applies to you. You don't want to be the new Superstrike Ltd.

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  • jpkeates
    replied
    Originally posted by KTC View Post
    We're not talking about an existing tenancy. The OP wants to agree a new tenancy which will start after the Tenant Fees Act come into force. It is expected the Act will apply from June to all new tenancies (probably not including SPT arising from a fixed term granted before June). Landlords will be required to reduce existing deposit down to the 5 weeks amount for any new tenancies.
    I thought so too,

    (1)20Subject as follows, section 1 (prohibitions applying to landlords) does not
    apply to—
    (a)a requirement imposed before the coming into force of that section, or
    (b)a requirement imposed by or pursuant to a tenancy agreement entered into before the coming into force of that section.
    A deposit at the start of the lease is a requirement imposed before the coming into force of that section (which looks like June 1st 2019).
    Even though the tenancy is a new tenancy and the deposit is received again, the value of the deposit must be "a requirement imposed before the coming into force of that section".

    SPTs are explicitly excluded from the provision by the next section.

    On the other hand, I get the feeling that any rational interpretation is likely to go all superstrikey at some point.

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  • theartfullodger
    replied
    Originally posted by Goobs27 View Post
    I was at an ARLA meeting a few weeks ago where it was mentioned that the DPS are looking at introducing an option that allows an agent or landlord to return to the tenant any amount of the deposit over the 5 week limit. Unfortunately I think they have assigned the job of organising it to a close relative of Chris Grayling....
    Oh gawd think I'll top meeself...

    Do nothing, don't renew, just continue as perioidic, more flexibility to evict for landlord.

    Leave a comment:

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