Definition of "Deposit"

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Definition of "Deposit"

    Hi All,

    I'm (a landlord) using the RLA tenancy agreement. On the first page it says
    Tick the box to show that you agree to us collecting two rent payments in advance at the start of the tenancy. One is for the first rent period and the other is a payment for the next rent period. You must then make each following payment one calendar month (or as shown above) before the start of the rental period to which the payment relates. Paragraph D8 on page 4 of this agreement will apply.
    Paragraph D8 is:
    We [the landlord] agree to do the following: ... Refund any rent you have paid which relates to a rental period which starts after the tenancy ends. We are allowed to take from this refund any rent or other money you owe us
    Does this last line mean the month-in-advance payment is really a deposit? There is a separate section on the agreement which deals explicitly with a deposit, which I have set at 1.5x a months rent. So what is the total deposit? In particular:
    • What amount should I register with the deposit scheme?
    • I've read elsewhere on this forum that it's a mistake to take more than 2 month's deposit. Is that the case here?


    Thanks a lot,
    Adam

    #2
    It appears to be asking for 2 months rent in advance and not connected to a dilapidations deposit. If you're confused then your tenant might find it even more difficult to understand. Ask the RLA for an interpretation.

    More than 2 months rent as a deposit can be deemed a premium lease, i,e, you are paying the landlord a sum for the privilege of living in the property.
    The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

    Comment


      #3
      The way it is phrased it comes over as a deposit. If you are going to do the two months in advance thing you need to provide that no rent is payable for the last month of the fixed term. I think it is a bit of a nonsense to have an agreement that provides for the tenant to pay rent for a period after the tenancy has come to an end.

      Comment


        #4
        Originally posted by Paul_f View Post
        More than 2 months rent as a deposit can be deemed a premium lease, i,e, you are paying the landlord a sum for the privilege of living in the property.
        I know that applied to Rent Act tenancies, but I did not think it applied to assured tenancies.

        Comment


          #5
          It's in the HA somewhere but can't remember where at the moment
          The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

          Comment


            #6
            Originally posted by Paul_f View Post
            It's in the HA somewhere but can't remember where at the moment
            It's tucked-away obscurely at the end of s.15 (see underlined bit below) but, even then, relevant only during a periodic tenancy.

            15. Limited prohibition on assignment etc. without consent.

            (1) Subject to subsection (3) below, it shall be an implied term of every assured tenancy which is a periodic tenancy that, except with the consent of the landlord, the tenant shall not:
            (a) assign the tenancy (in whole or in part); or
            (b) sub-let or part with possession of the whole or any part of the dwelling-house let on the tenancy.

            (2) Section 19 of the Landlord and Tenant Act 1927 (consents to assign not to be unreasonably withheld etc.) shall not apply to a term which is implied into an assured tenancy by subsection (1) above.

            (3) In the case of a periodic tenancy which is not a statutory periodic tenancy or an assured periodic tenancy arising under Schedule 10 to the Local Government and Housing Act 1989 subsection (1) above does not apply if:
            (a) there is a provision (whether contained in the tenancy or not) under which the tenant is prohibited (whether absolutely or conditionally) from assigning or sub-letting or parting with possession or is permitted (whether absolutely or conditionally) to assign, sub-let or part with possession; or
            (b) a premium is required to be paid on the grant or renewal of the tenancy.

            (4) In subsection (3)(b) above “premium” includes:
            (a) any fine or other like sum;
            (b) any other pecuniary consideration in addition to rent; and
            (c) any sum paid by way of deposit, other than one which does not exceed one-sixth of the annual rent payable under the tenancy immediately after the grant or renewal in question.
            JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
            1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
            2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
            3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
            4. *- Contact info: click on my name (blue-highlight link).

            Comment


              #7
              "or other money" means this probably falls under the definition of Deposit under the HA 2004, as this could include damage to the property etc.

              Accordingly, either:

              a. this phrase should be removed; or

              b. the whole amount must be protected in a scheme (if it is an AST).

              Comment


                #8
                Section 15 HA 1988 is not equivalent to Sections et seq of the Rent Act 1977. It does not prohibit taking a deposit exceeding two months' rent, it just sets out the consequences of doing so in certain cases.

                Comment


                  #9
                  Originally posted by Lawcruncher View Post
                  Section 15 HA 1988 is not equivalent to Sections et seq of the Rent Act 1977. It does not prohibit taking a deposit exceeding two months' rent, it just sets out the consequences of doing so in certain cases.
                  Yes, i.e. only during a contractual [non-statutory] periodic tenancy granted on the basis of no assignments.
                  JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                  1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                  2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                  3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                  4. *- Contact info: click on my name (blue-highlight link).

                  Comment


                    #10
                    I think it needs to be borne in mind that any clever scheme that seeks to get round protection that Parliament has seen fit to provide is generally doomed to fail.

                    If you set something up so that the tenant pays something that the landlord is under any sort of obligation to refund, I do not see how that something can be anything other than a deposit.

                    If you set up a genuine "month-in-hand" system I think you will be all right. Under such a system you pay two months on entry but never pay anything at the start of the last month - it is covered by the month-in-hand. An agreement for six months starting on 1st January would require payments something like this:

                    Rent for January and February to be paid on 1st January

                    Rent for March to be paid on 1st February

                    Rent for April to be paid on 1st March

                    Rent for May to be paid on 1st April

                    Rent for June to be paid on 1st May

                    At no time is the landlord holding money that is potentially refundable to the tenant.

                    The words: Refund any rent you have paid which relates to a rental period which starts after the tenancy ends. We are allowed to take from this refund any rent or other money you owe us make it clear that the landlord is holding money for security. They create what is a deposit in all but name.

                    Comment


                      #11
                      Thanks a lot for the comments so far. I've emailed the RLA, though am not sure how successful that will be as I'm not a member (I just paid the £5 for the agreement).


                      Originally posted by Lawcruncher View Post
                      I think it needs to be borne in mind that any clever scheme that seeks to get round protection that Parliament has seen fit to provide is generally doomed to fail.
                      Just to be clear, I'm not trying to get round anything. In fact I chose to pay for the RLA agreement in the hope that it would be sensible and clear for all involved!


                      If you set up a genuine "month-in-hand" system I think you will be all right. Under such a system you pay two months on entry but never pay anything at the start of the last month - it is covered by the month-in-hand. An agreement for six months starting on 1st January would require payments something like this:

                      Rent for January and February to be paid on 1st January

                      Rent for March to be paid on 1st February

                      Rent for April to be paid on 1st March

                      Rent for May to be paid on 1st April

                      Rent for June to be paid on 1st May

                      At no time is the landlord holding money that is potentially refundable to the tenant.
                      So what happens if the tenancy carries on on a monthly basis after the end of the fixed term?

                      The words: Refund any rent you have paid which relates to a rental period which starts after the tenancy ends. We are allowed to take from this refund any rent or other money you owe us make it clear that the landlord is holding money for security. They create what is a deposit in all but name.
                      Yes, if this is the case, do I need to register it under the deposit protection scheme (and, for that matter, reduce the "real" deposit, so I don't go over the 1/6th year limit)?

                      This is all a bit annoying as I've already had a Deed of Guarantee signed so presumably if I make any subsequent changes to the tenancy agreement, I'm going to have to re-arrange the signing etc of that as well...

                      Thanks,
                      Adam

                      Comment


                        #12
                        Originally posted by adamr View Post
                        So what happens if the tenancy carries on on a monthly basis after the end of the fixed term?
                        You have some tricky drafting to do.

                        Originally posted by adamr View Post
                        Yes, if this is the case, do I need to register it under the deposit protection scheme (and, for that matter, reduce the "real" deposit, so I don't go over the 1/6th year limit)?
                        I think you probably do. If you are going to have to do it, you may just as well have an agreement that provides for a deposit in the normal way.

                        Originally posted by adamr View Post
                        This is all a bit annoying as I've already had a Deed of Guarantee signed so presumably if I make any subsequent changes to the tenancy agreement, I'm going to have to re-arrange the signing etc of that as well...
                        Almost certainly, yes.

                        Comment


                          #13
                          Originally posted by Lawcruncher View Post
                          Originally posted by adamr
                          So what happens if the tenancy carries on on a monthly basis after the end of the fixed term?
                          You have some tricky drafting to do.
                          Grr. Has anybody else used the RLA agreement and/or had any clarification from them?

                          Thanks,
                          Adam

                          Comment


                            #14
                            OK, I've been doing some more research and it seems there's some controversy regarding the RLA agreement (e.g. post 16: ht tp://forums.moneysavingexpert.com/showthread.html?t=1825589), which is frustrating as I thought by paying a reputable organisation a fiver I'd get a decent document

                            Now I need to work out how to fix it and remove the month-in-advance rubbish. I've found an old version of the document (ht tp://ww w.tenantdocs.co.uk/RlaAst2004Free.pdf) floating around which is very similar to the current one, but without the "tickbox" section on the month-in-advance thing or section D8.

                            Does it seem sensible to simply remove those two bits on my agreement and go with that? I'd be really grateful for any advice as my tenants are due to move in in a couple of days!

                            Thanks a lot,
                            Adam

                            Comment


                              #15
                              I have seen one agreement promulgated by a reputable organisation and was not impressed. Some legal advice given on the websites of reputable organisations is plain wrong. I often wonder if the documents drafted and the advice tendered are the responsibility of Sandra in accounts.

                              No precedent can ever be guaranteed to be perfect or to cover all the angles. Even so, it is not unreasonable to repose your confidence in a precedent you find in a book published by a recognised legal publisher or produced by a landlord and tenant specialist lawyer. Anything else needs to be treated with caution.

                              Comment

                              Latest Activity

                              Collapse

                              • Reply to Evicted and left a few bits
                                by jpkeates
                                Not unless there's a right of offset in the tenancy agreement.
                                There's no general right to offset in English law.

                                In reality, if the landlord did sell the belongings and claim the proceeds were to recover the cost of disposal (which the bailee is entitled to do), the tenant would...
                                07-07-2022, 13:45 PM
                              • Evicted and left a few bits
                                by betsy2040
                                I been evicted today and I’ve left a few bits of stuff ,

                                marble table and dining chairs , mattress 2 sofas ect ect boxes of stuff , curtains , few boxes of clothes and shoes , and sideboards and all my garden stuff

                                How long have I got to remove all this?...
                                06-07-2022, 18:56 PM
                              • Reply to Renters reform bill
                                by jpkeates
                                Magna Carta doesn't apply to us common people.

                                Your right to private property is in the Human Rights Act, though.
                                And, ironically, our best protection is likely to be the amount of property that is owned by non-UK citizens, particularly companies.
                                07-07-2022, 13:42 PM
                              • Renters reform bill
                                by flyingfreehold
                                i have just read an interesting summary of all that is proposed in the EG (Estates Gazette). As drafted it effectively brings back a form of rent control as tenants will have the right to go to First Tier Tribunal to challenge any rent increases which must be proposed by section 13 notices.
                                ...
                                04-07-2022, 16:29 PM
                              • Reply to Choosing tenants
                                by AndrewDod
                                Can't see any problem with asking for bank statements and landlord references from all of them right now. Also visit them in their current homes if possible. Don't be unfair and lead them on however - explain clearly that they are one of three possible candidates out of 90. Ask for copies of their current...
                                07-07-2022, 13:42 PM
                              • Choosing tenants
                                by annam222
                                Hi all,
                                I advertised my flat on OpenRent (for the first time) and received 90 viewing requests in a few days (I have removed the advert now).
                                I set up an automated reply to all enquires with a list of 10 questions, then picked five potential tenants that ticked all the boxes. I called all...
                                07-07-2022, 13:09 PM
                              • Reply to Choosing tenants
                                by AndrewDod
                                It depends. I have been picking people who I know (99.9%) will NOT want to stay in the UK for very long. Long term UK-based renters - way too much risk (of later imposed very low rates of rent, enforced property sales from some later lunatic government...).

                                Length of stay is a relatively...
                                07-07-2022, 13:39 PM
                              • Reply to Choosing tenants
                                by Hudson01
                                Very difficult indeed and not a big surprise given the chaos that is currently the PRS. They of course have to pass all the standard checks on their salary and references, but when that is a given............. i pick on ' gut feeling ', no science at all ! I meet lots of '' wrong unsv'' in my job so...
                                07-07-2022, 13:34 PM
                              • Reply to Choosing tenants
                                by slopemaster
                                try and get a feel for who will stay longest?
                                07-07-2022, 13:23 PM
                              • Reply to Can I claim rent reduction due to building noise and landlord’s misrepresentation ??
                                by A.Renter
                                I'm not sure specifically... something about removing the old roof and replacing it with a modern one. The entire building is covered in scaffolding which is still not completed after 2+ weeks of the workmen building it. Then once my block is done they'll be taking it down and moving on to the 2nd one...
                                07-07-2022, 12:07 PM
                              Working...
                              X