Deposits

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    Deposits

    We have HMOs and up until the law changed, we took deposits.We still hold a couple of deposits from before then.Do we need to register them in a scheme of are they alright in my bank account?

    Since the law changed we stopped taking the 4 weeks deposit.We continue to take the 4 weeks rent in advance as before.All our tenancies are weekly in advance, so they pay the first weekplus 4 weeks when they move in and then continue weekly until they hand in their notice,at which point they stop paying for the last four weeks.On move out date ,theoretically we are quits. Is this legal or is the 4 weeks rent in advance classed as a deposit?

    #2
    Deposits need to be protected (and the deposit scheme's prescribed information sent to T) if you have signed any new contracts with your Ts since April 2007.

    Most ASTs require rent to be paid in advance.
    I'm a good tenant with great landlords
    I'm also a living, breathing, fully cooked female.

    Comment


      #3
      The 4 week in advance scheme that you describe is a deposit (of 3 weeks rent) unless the contract specifically states what weeks it will apply to. So, on a 52 week AST commencing 20/1/12 it would be fine if it says payment in advance for the first week and the 50th, 51st & 52nd week. However if it is just an open 'end of the tenancy' then you need to protect that amount.

      Protection is free at www.depositprotection.co.uk

      Without protection, any s21 you issue will be invalid and therefore defeatable in court.

      http://nearlylegal.co.uk/blog/2009/0...eposit-honest/

      So far as the deposits you acknowledge are concerned, if you have issued a new contract to these people since 6/4/07 then it needs protecting - if not, then you are fine.

      Comment


        #4
        Originally posted by andyc View Post
        Is this legal or is the 4 weeks rent in advance classed as a deposit?
        It may fall under the definition of a deposit in Chapter 4 Housing Act 2004 unless the contract specifies the precise period to which the four weeks' rent applies. This would have to be four weeks during the fixed term (as a statutory periodic tenancy doesn't exist until it arises). If you grant contractual periodic tenancies, then it becomes impossible to specify the period to which the rent applies.

        The current arrangement of having four weeks rent in advance being held by you against an unspecified period means that, should the T stop making rent payments mid tenancy, you would have no choice but to apply these payments mid-term (before you could serve a s.8 notice citing the mandatory ground 8).

        In short, taking rent in advance instead of a deposit is pointless exercise and offers you no security. It may also expose you to a claim for deposit non-compliance.

        Comment


          #5
          Give them a rent book split into weekly terms.
          The rent they have paid in advance is then clearly shown as it not being a damage deposit.
          Allow tenants to protect their own deposits. I want free money when they do it wrong

          Comment


            #6
            Originally posted by westminster View Post
            It may fall under the definition of a deposit in Chapter 4 Housing Act 2004 unless the contract specifies the precise period to which the four weeks' rent applies. This would have to be four weeks during the fixed term (as a statutory periodic tenancy doesn't exist until it arises). If you grant contractual periodic tenancies, then it becomes impossible to specify the period to which the rent applies.

            The current arrangement of having four weeks rent in advance being held by you against an unspecified period means that, should the T stop making rent payments mid tenancy, you would have no choice but to apply these payments mid-term (before you could serve a s.8 notice citing the mandatory ground 8).

            In short, taking rent in advance instead of a deposit is pointless exercise and offers you no security. It may also expose you to a claim for deposit non-compliance.
            I am afraid this has occured because we used to take rent monthly in advance and a deposit of 1 month.We stopped taking deposits when the law changed and continued with the month in advance.Then we took tenants on weekly paying and kept the 4 weeks in advance bit.I am not doing it this way to avoid anything.It just evolved from when we took in weekly paying tenants .

            Not sure what to do now.

            If I deposit it in a scheme, It would come to me as payment for the last 4 weeks anyway so defeats the object of placing it in a scheme ie it will always be payed to me.!
            New tenancy agreements time maybe??

            Comment


              #7
              So what do I do.
              I have read our tenancy agreements since 2006.I have a couple since april 2006 where I have taken 4 weeks rent in advance and it is sitting in my business account at present.

              Should I reissue new tenancy agreements subject to the tenants agreement and change the rent in advance to "Deposit" on the new agreement and then protect it?
              How do I make it all legal?

              Comment


                #8
                Any deposit taken before 6th April 2007 does not need to go into a deposit scheme unless you have granted a further tenancy agreement for that property to the same tenants.
                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


                  #9
                  I meant 2007

                  Comment


                    #10
                    The first thing to realise is that you can not force tenants into a new tenancy agreement if they don't want it - their existing Statutory Periodic Tenancies are perfectly legitimate for as long as they want them or you legally evict them.

                    The two easiest options are:
                    1) Use the money held to cover the tenants next X weeks rent, giving them a break from payments but meaning they will no longer be in credit to you by 3 weeks rent so they will have to continue to pay to the end of the tenancy; or
                    2) Protect the deposits for free by paying them into www.depositprotection.co.uk and provide the tenants with the information required by the scheme.
                    Both of these will inconvenience you, but neither would be pointless as by carrying out either option you will be complying with the law and protecting yourself from considerable potential (but admittedly unlikely) penalties.

                    You will appreciate that for future tenants you need to reconsider your process - this will be particually imporant with the introduction of the Localism Act which will tighten up deposit protection law considerably.

                    Comment


                      #11
                      Thankyou for that advice.It is a bit of a stress knowing what to do.
                      All new tenancies will incur a deposit from now on and they will have to pay until the end of the tenancy.
                      I think I would prefer to just deposit the existing money in a scheme and inform them.The only issue is how to get the money for the last 4 weeks rentas per the wording in the AST. I assume the DPS wont release the funds to me when the rent is due.

                      Comment


                        #12
                        Originally posted by andyc View Post
                        Thankyou for that advice.It is a bit of a stress knowing what to do.
                        All new tenancies will incur a deposit from now on and they will have to pay until the end of the tenancy.
                        I think I would prefer to just deposit the existing money in a scheme and inform them.The only issue is how to get the money for the last 4 weeks rentas per the wording in the AST. I assume the DPS wont release the funds to me when the rent is due.
                        Realistically, your chances of getting them to cough up the last 3 weeks rent is limited, but you should be able to claim it from this 'deposit' easily enough at the end of the tenancy. Unpaid rent is far easier to prove than damages.

                        Comment

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