compulsory deposit scheme - hypothetical avoidance method

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  • compulsory deposit scheme - hypothetical avoidance method

    1. zero deposit. Instead, rent is paid 2 months in advance, so the day the tenant moves in you already have credit for 2 months. Legally not a deposit, so wont have to go in the scheme. Tenancy agreement modified so as not to refer to deposit, but still hold tenant liable for damage, utility bills etc

    2. clause in tenancy agreement whereby tenant agrees that deposit will not be held in scheme. Not sure if this is plausible/legally binding.

    3. pass on costs of scheme to tenant. probably the most sensible thing to do, although you'll still miss out on the interest you would otherwise earn.

  • #2
    I must admit I gave this idea some thought but came to the conclusion that the tenant would just avoid paying the last two months rent instead of just one month in the event of wanting to get their money back!

    Also, why would you lose out on the interest? You will still have the equivalent deposit amount in your bank account! Unless of course your rent received account doesn't pay interest.

    Kind Regards

    J

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    • #3
      All the avoidance schemes have already been aired!
      Originally posted by hypotheticalmonkey View Post
      1. zero deposit. Instead, rent is paid 2 months in advance, so the day the tenant moves in you already have credit for 2 months. Legally not a deposit, so wont have to go in the scheme. Tenancy agreement modified so as not to refer to deposit, but still hold tenant liable for damage, utility bills etc If, as I think you would intend to do, take rent from month two, then this would still constitute a deposit, so you won't get away with this one!

      2. clause in tenancy agreement whereby tenant agrees that deposit will not be held in scheme. Not sure if this is plausible/legally binding. Err.....definitely NOT!

      3. pass on costs of scheme to tenant. probably the most sensible thing to do, although you'll still miss out on the interest you would otherwise earn. Any interest is negligible and is far outweighed by the costs concerned. you will also not be able to pass on the costs to the tenant as it's already been outlawed, but you could pass them on to the landlord if you are an agent.
      If you read some of the many articles in the professional magazines you will come across about every variation imaginable.
      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.

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      • #4
        what is to prevent charging an 'administration fee' for a new tenancy - not referenced directly to the deposit scheme, just a general fee.

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        • #5
          Hypo - i currently managed my own lets from start to finish and only charge £40 admim fee (which is less than half the cost of the credit check/rent insurance). I intend to raise my admin fee - even if it's only to cover the full cost of the credit check/insurance.

          J

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          • #6
            Only guaranteed avoidance method is by switching to Standard Assured Tenancies (losing s.21 availability, though).
            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).

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            • #7
              paul - re "If, as I think you would intend to do, take rent from month two, then this would still constitute a deposit, so you won't get away with this one!" - is the legally correct? if no mention is made of a deposit in the AST, why would this rent cycle be regarded as constituting a deposit? esp if rent payment one (1 month before start) and rent payment 2 (day of start) are paid seperately? thx

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              • #8
                Originally posted by hypotheticalmonkey View Post
                1. zero deposit. Instead, rent is paid 2 months in advance, so the day the tenant moves in you already have credit for 2 months. Legally not a deposit, so wont have to go in the scheme. Tenancy agreement modified so as not to refer to deposit, but still hold tenant liable for damage, utility bills etc
                I would imagine that you could run into trouble with serving a section 8 for non-payment of rent. The tenant would not be 2 months in arrears until an extra month had passed...

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                • #9
                  All this to save 15 quid after tax?
                  Now signature free.

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                  • #10
                    Originally posted by lorenzo View Post
                    All this to save 15 quid after tax?
                    In my case, I am somewhat worried that the TDS will be a Tenant's charter to cause damage and get away with it (rubbing salt in the wound by requiring me to jump through another admin hoop.) At the moment the T needs to be sure of their ground to dispute your deposit deductions, if any, but I doubt this will be the case under TDS.

                    I suppose its fear of the unknown, but also a worry that it will be similar to ground 8 court action against a bad tenant, which seems to be weighted against the LL. Hope I'm wrong (especially as I will probably have a new tenancy starting around the start of May-happy happy, joy joy!)

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                    • #11
                      Originally posted by Miffy View Post
                      In my case, I am somewhat worried that the TDS will be a Tenant's charter to cause damage and get away with it (rubbing salt in the wound by requiring me to jump through another admin hoop.) At the moment the T needs to be sure of their ground to dispute your deposit deductions, if any, but I doubt this will be the case under TDS.

                      I suppose its fear of the unknown, but also a worry that it will be similar to ground 8 court action against a bad tenant, which seems to be weighted against the LL. Hope I'm wrong (especially as I will probably have a new tenancy starting around the start of May-happy happy, joy joy!)
                      Well here in Oz where a similar scheme has been running for donkey's years, it all comes down to an accurate condition report and much effort is put into preparing these.

                      Where this is done adequately, there is no argument if the tenant has caused damage, left it dirty or whatever.

                      Much better than the way it was before where Ts & LLs were in a state of undeclared war .

                      In the UK it may mean using independent clerks from what I'm reading round about.... but FWIW these don't exist here...I've never heard of it anyway, all done in-house.
                      Now signature free.

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                      • #12
                        Originally posted by lorenzo View Post
                        Well here in Oz where a similar scheme has been running for donkey's years, it all comes down to an accurate condition report and much effort is put into preparing these.

                        Where this is done adequately, there is no argument if the tenant has caused damage, left it dirty or whatever.

                        Much better than the way it was before where Ts & LLs were in a state of undeclared war .

                        In the UK it may mean using independent clerks from what I'm reading round about.... but FWIW these don't exist here...I've never heard of it anyway, all done in-house.
                        Yes, I am thinking I need to beef up my inventory into a comprehensive condition report and maybe even take some video footage. Bit of a pain and things could still get missed, but it seems the best way. Hopefully the tenants won't be too arsey over damage, as they will presumably want their deposits back ASAP. How easily things will get resolved if the tenants do a moonlight flit is also a bit of a worry.

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                        • #13
                          I agree with Miffy re moonlight flits! What are the procedures likely to be in the event of abandonment? Anyone know?

                          J

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                          • #14
                            Originally posted by jeffrey View Post
                            Only guaranteed avoidance method is by switching to Standard Assured Tenancies (losing s.21 availability, though).

                            Hi Jeffrey

                            Where can templates of these be downloaded?

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                            • #15
                              can i just state categorically this is not about avoiding the paltry £15 costs. It is about sticking one to the state and their endless interfering. thx

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