Is not taking a deposit a bad idea?

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    #16
    Originally posted by agent46 View Post
    But that will only protect against rent arrears until the end of month 2.

    You also can't ask for 2 months rent to be paid in advance upon commencement and then ask for another month's rent at the end of month 1 and then continue demanding the rent monthly thereafter because the "spare" months money would, for the purposes of HA 2004 be deemed to be a deposit.
    I was under the impression that you could do this.

    I.e. Take three months rent upfront and set it up as a rollover, i.e. the tenant still has to pay their rent on the second month, so there is always two months rent in the bank. If the tenant gives two months notice then they could start using this money, unlike a depoist.

    Almost on the contary I didn't think you could take more than 1 1/2's months rent without it being counted as a premium, although I would need to double check that.

    To answer the original question - I always recommend to my landlords that they take a deposit. I believe that people are more likely to clean and respect the place if they have some money to lose, although I appreciate it that it is not the same with everyone.

    However, no deposit can be a selling point!

    Really depends on the property and the circumstances.

    Kind regards,

    John

    Comment


      #17
      Originally posted by MaverickPropertyManagemen View Post
      I was under the impression that you could do this.

      I.e. Take three months rent upfront and set it up as a rollover, i.e. the tenant still has to pay their rent on the second month, so there is always two months rent in the bank. If the tenant gives two months notice then they could start using this money, unlike a depoist.
      I suppose you could present the arrangement as the 2 months money paid on commencement represents the rent for months 5 and 6, but then the tenants would not be obliged to pay any rent in months 5 and 6. Therefore, at the end of the tenancy, the net result would be the same as not taking a deposit (ie: no security against damage or past or future arrears).

      However, the LL might nonetheless fall foul of HA 1988 s.212(8)

      “tenancy deposit”, in relation to a shorthold tenancy, means any money intended to be held (by the landlord or otherwise) as security for—

      (a) the performance of any obligations of the tenant, or

      (b) the discharge of any liability of his


      I'm not sure I'd fancy my chances of convincing a judge that money taken at the commencement of the tenancy for rent in months 5 and 6 of the tenancy isn't held as security for the performance of an obligation or discharge of a liability (ie: the obligation/liability in question being "to pay rent in months 5 and 6"). I certainly wouldn't be willing to bet 3 X 2 months rent on the outcome - would you?!

      These type of loophole seeking avoidance schemes remind me of the old lease/licence cases where LLs tried to draft all sorts of sham arrangements to avoid giving a tenant security of tenure under the Rent Act. As can be seen from those cases, the courts are not easily fooled and they will give effect to the true nature of a transaction regardless of what one or both of the parties choose to call it. So "if it walks like a duck and quacks like a duck, then it's probably a duck", or to push the zoological metaphor even further, as Bingham LJ said in another lease/licence case, Antonides v. Villiers, "A cat does not become a dog just because the parties have agreed to call it a dog."
      Health Warning


      I try my best to be accurate, but please bear in mind that some posts are written in a matter of seconds and often cannot be edited later on.

      All information contained in my posts is given without any assumption of responsibility on my part. This means that if you rely on my advice but it turns out to be wrong and you suffer losses (of any kind) as a result, then you cannot sue me.

      Comment


        #18
        Originally posted by welshgold View Post
        since our beloved goverment caused more hassel and more paperwork by saying we cant take a deposit without Involving 3rd parties, we just ask for extra months rent in advance.
        How does that work then? surely that just means the last month is free to the tenant? you can't deduct from this for damage, because that would make it a deposit, and that would result in you being fined 3 times the monthly rent

        Originally posted by porridge View Post
        perhaps the deposit money could be taken as an extra months rent in advance?
        That would be a deposit and would require protecting in one of the government approved schemes

        Originally posted by porridge View Post
        but lets be honest, a lot of tenants assume that the deposit can be used as rent owed.
        If we're being honest, a lot of landlords see the deposit as their re-decoration budget

        Comment


          #19
          Originally posted by nick.. View Post
          How does that work then? surely that just means the last month is free to the tenant?

          you can't deduct from this for damage, because that would make it a deposit, and that would result in you being fined 3 times the monthly rent

          That would be a deposit and would require protecting in one of the government approved schemes
          Did you read my post? You might recognise it - it's the fairly long, beautifully-written one right above yours.

          Honestly. I sometimes don't know why I bother crafting these elegant, impeccably researched jewel-like snippets when some horny-handed son of the soil just comes along and repeats my conclusions, only their post is crafted with all the style and grace of a fully laden cement-truck. *



          *If I was allowed to use more smilies, I would also put a "winky" and "tongue-sticky-out" face.
          Health Warning


          I try my best to be accurate, but please bear in mind that some posts are written in a matter of seconds and often cannot be edited later on.

          All information contained in my posts is given without any assumption of responsibility on my part. This means that if you rely on my advice but it turns out to be wrong and you suffer losses (of any kind) as a result, then you cannot sue me.

          Comment


            #20
            Originally posted by porridge View Post
            Looking at the hassle involved with deposits, I am considering not taking a deposit when I take on the next tenant, does anyone think this is. a bad idea?

            Basically I can't see any advantage to be gained, the DPS involves so much red tape and looks stacked in the favour of the tenant, surely it would be just as easy to make a small claims for any damage?, perhaps the deposit money could be taken as an extra months rent in advance?
            I would have thought that small claims for damage would be a lot more hassle than the very minimal 'red tape' encountered on the DPS route.

            Providing you have genuine reason to withold monies, the DPS will uphold.

            Comment


              #21
              Originally posted by agent46 View Post
              Did you read my post? You might recognise it - it's the fairly long, beautifully-written one right above yours.

              Honestly. I sometimes don't know why I bother crafting these elegant, impeccably researched jewel-like snippets when some horny-handed son of the soil just comes along and repeats my conclusions, only their post is crafted with all the style and grace of a fully laden cement-truck.



              *If I was allowed to use more smilies, I would also put a "winky" and "tongue-sticky-out" face.
              Fair enough, consider my post there for any other "horny-handed sons of the soil" that might drop off whilst reading your reply

              Comment


                #22
                I am not an expert in the lettings business and come here for great advice and I am just about to secure a deposit for the first time.

                If I were a professional tenant I would love to move into your property with no deposit paid, pay no more rent for months before eviction with the possibility of getting three times the deposit because you have not put my several months in advance "rent" into a TDS.

                After reading the arguments you could potentially be massively out of pocket through fines or attempting to chase debts through the courts trying to avoid the red tape. A little bit of hassle now could save loads later.

                Comment


                  #23
                  Sorry for the massive gaps between my posts, I've been a little busy of late!

                  I just wanted to clarify the points I made regarding taking payment for the first months rent and the last months rent.

                  I would strongly discourage doing this instead of protecting the bond. What I was suggesting is that the first and last months rent could be taken, and the bond protected, not instead of the bond being protected.

                  If you just take the first and last months rent, you have two fairly big problems. No deposit to cover damage, and secondly you going to struggle to show that it hasn't been taken instead of a deposit.

                  I did have a little ponder today over taking the first and last months rent, and arrears. If you take the first and last months rent, and the tenant doesn't pay for month 2, can you then start the S8 on the first day on month 3, or would it get refused on the grounds that you have actually taken two months rent?

                  Anyway, I hope that goes some way to clarifying my views on the TDS.

                  Kind regards,

                  John

                  Comment

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