Can I ask Tenants to Register their own Deposits?

by Readers Question

14:00 PM, 11th February 2013
About 6 years ago

Can I ask Tenants to Register their own Deposits?

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Can I ask Tenants to Register their own Deposits?

Can I ask Tenants to Register their own DepositsI asked My|Deposits some time ago if my tenants deposit had to be re-protected if the AST rolled over to an SPT (Periodic Tenancy), when it was the same property, same terms, but increased rent, without taking an increased deposit.

Their reply was that it did not have to be re-protected as it had rolled over to a Periodic tenancy.

I recently had an email from My|Deposits about protecting deposits.  They probably sent the same mail to other landlords that use their service.  It says a tenant’s deposit does not have to be re-protected when the tenancy rolls over to a periodic but in their words it is now written:-

“A SPT is created when the end date of a fixed term AST has been reached and the existing tenants remains in the property on exactly the same terms as the original tenancy agreement (other than an agreement by the parties to increase the rent).”

This bit in brackets was not said in my original query so the deposit was not re-protected when going to a periodic tenancy, but the rent which was originally low was increased slightly.  The tenant was not offered a new AST as they could not find a Guarantor the second time around.

No wonder things have become confused.  This tenant has already been served a section 21 with the two months notice on the Periodic.  So although I checked things out with My|Deposits before hand I may now be in the wrong.

I have another tenant on a SPT who’s deposit was protected on the original AST. They  informed me the will have to move in April due to the LHA cuts. However, I have agreed to reduce their rent by £35pm.  They are happy to stay on with the reduction and I am also happy as finding a new tenant through an agent will cost me the £35pm. I am loosing on the rent but I keep the good tenants who have always paid the rent.

So NOW I am reducing the rent and the original terms have changed is re-protection needed again?

I would be happy to avoid all the confusion with large fines for getting it wrong by letting the tenant protect their own deposit.  They can send the deposit to scheme holders and get it registered. The landlord will not hold the deposit and the deposit cannot be released to the tenant without the landlord’s permission.  The tenant can be responsible for their own deposit and know if they pay the rent and do no damage it will be returned with the landlords approval.

Has anyone suggested this plan before?  I am not interested in holding the deposit, having it registered and sending reams of information to tenants, only to be penalised if I make an honest mistake.

If tenants are worried about their deposits, as are the government, and do-gooders,  why can’t we let them register it and send me the appropriate paperwork?

Maybe you can put this concept to the vote on your website?

I feel all honest landlords would be in favour as we can all do without the hassle, while still knowing the tenants deposit is being looked after in case we need to claim on it.  Someone in the government will probably have a good reason why tenants should not have the responsibility of registering their own deposit, but can handle the responsibility of looking after the LHA money!

If this is of interest you may use it in your articles.

Regards

Recardo



Comments

Mark Alexander

11:55 AM, 11th February 2013
About 6 years ago

Dear Recardo

I sympathise with your position but I don't think you can’t ask tenants to protect their own deposits. My understanding is that if you want to take a deposit then it is up to you to protect it.

Was the first piece of advice you have referred to from My|Deposits in writing? If so then it could be that you heard what you wanted to hear. That's what would be claimed in Court I can assure you. The lesson here is get any advice in writing.

The latest advice from MyDeposits is correct in my opinion, although others would argue that you should re-protect at SPT and the Housing Act 1988 says in several places that a SPT is a new tenancy. All deposits must be re-protected when a new tenancy is created. That particular argument will not be settled until the case is raised at a Court of Law. Some professional advisers believe that it's better to be safe than sorry and re-issue PI when a tenancy becomes a SPT. Others are happy to disregard that advice based on the fact that they have it in writing from their deposit Protection Scheme that they do not need to re-issue PI or re-protect.

If you do not wish to hold deposits in your own account then there is no point in you paying for that privilege. On that basis the DPS custodial scheme may be a better one for you.

Mary Latham

12:29 PM, 11th February 2013
About 6 years ago

MyDeposits are not saying that you need to re-protect the deposit when there is an rent increase, they have worded that badly and what they mean to say is that the only change that can be made to the original AST that DOES NOT trigger a new protection is an increase in rent. You can email them to confirm this but I assure you that this is correct according to their rules.
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Recardo Knights

13:22 PM, 11th February 2013
About 6 years ago

Hi Mary & Mark Thanks for your coments having looked at it again and the wording as Mary says increasing or lowering the rent does not mean new protection is neaded. On my first reading and going through an eviction my first thought was they said re-protection is not required (i have that in wrting from them), And now it seems it is. could have been worded better.
I do not need to hold a deposit and be responsible for providing information to the tenant, only to know it is held somewhere and I can draw against it for damage, non payment of rent etc. So I will check out the DPS custodial scheme. If the only difference is that they hold the money it is not a solution.
As the tenants are always moaning about bad landlords not returning deposits, I don't see why they cannot send thier deposit to a scheem holder. At the end of a tenancy if there is no problems the LL athorises the release of the deposit back to the tenant. If there is a dispute it will be settled through the scheme holder, and the tenant will have to wait for the outcome to see what the get back.
No more fines for LL'S, and if the tenant does not send off their deposit before the start of a tenancy, the tenancy is nul and void.

Mary Latham

14:11 PM, 11th February 2013
About 6 years ago

Recardo Please don't say that, this is what Government wanted when they drafted the Housing Act 2004 and we fought very hard to get landlords the option of holding our own deposits and paying a fee to enable tenants to have free arbitration in the case of a dispute. We did this having spoken to landlords in Australia where all deposits had to be put into a custodial scheme and it could take over a year for a landlord to get the money back when the tenants just walked away without signing it out to them. It is always good to have a choice because we all manage out properties differently.
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Mark Alexander

2:54 AM, 12th February 2013
About 6 years ago

I must say Recardo, that does make a lot of sense, it's then up to the landlord to say no deposit protection certificate = no keys

Mark Alexander

2:56 AM, 12th February 2013
About 6 years ago

Hi Mary, I agree with choice but equally I can't see why Recardo's suggestion couldn't be one of those choices

Industry Observer

16:00 PM, 12th February 2013
About 6 years ago

Recardo

Only go by the Law and just do what Schemes say purely to comply with their own rules, not the Law. But don't rely on the Schemes for interpretation of the Law any more than me, Mark, Mary Latham, Ben Reeves or the Man in the Moon as only a Judge ultimaterly can decide just what Parliament meant and what they did not!!

You may not need to do anything to re-protect a deposit, that depends on the Scheme you use and whether any buttones need to be pressed and revised dates entered etc. You do this on a renewal and a periodic because at Law they are both NEW tenancies.

This means you also need to re-issue the Prescribed Information if you want to be 100% certain you have done everything and covered yourself even if you didn't need to. You will find counter opiniuons to this, by all means listen to thjem instead if you prefer but remember if you issue fresh PI and didn't need to it doesn't matter but if it turns out when the eventual test case comes along, as it will, that you should have done then you'll wish you had done so.

Tenants cannot register the deposit the Statute clearly lats the responsibility on the Landlord or their agent - though the Landlord is always liable to the tenant.

23:07 PM, 12th February 2013
About 6 years ago

I think you are confusing Law with the scheme. The Law says you must protect a deposit that has been agreed and paid to you at a particular time, date and you must provide key details of the scheme you have used all within 30 days of receipt. using my|deposits if you have protected the deposit under an AST which then becomes a SPT there is no need to re-protect. However, if you change a material condition of the original tenancy (contract/property law) it is then a new tenancy. So if you change the rent, you have change a material condition of your original contact. it therefore becomes a new contract. Also if you have changed the rent you need to change the deposit if you increase with the rent you need to increase the deposit to have the same level of protection or if you decrease the rent you need to decrease the deposit to prevent the deposit becoming a premium. my|deposit is saying if you have protected say £1000 then if the deposit remains £1000 and your tenancy becomes a SPT then that deposit amount remains protect. Remember that my|deposits is an insurer that is their job, it is your job to make sure you are complaint with legislation. I must say that as a landlord I can empathetic with your desire to reduce you workload, but with great power (property) comes responsibility. I could write a 1000 word article on why you should not let a tenant be responsible for and manage their own deposit. It would amount to setting up a bar in the middle of town and posting a notice "drink all you want and just put the money in the box on the counter". In criminology they say 25% of the population are totally honest, 25% are totally dishonest and 50% are only as honest as the rules imposed on them. Then that would mean 75% would fail to do what they should when it came to fulfilling their obligations to submitting their deposit. But as a professional inventory clerk I would say of the 25% who have submitted their deposit another 10% to 15% would try and get their full deposit back by dishonest means if they should discover they are liable for damages.

Mark Alexander

9:11 AM, 13th February 2013
About 6 years ago

Syd, why do you think you must change the amount of the deposit if you change the rent? You may choose to and in those circumstances I would personally check with MyDeposits and get them to put their advice in writing. Whenever I have adjusted rent I have not adjusted the deposit so I do not feel qualified to comment absolutely on that point. Clearly there is still lots of confusion on this point. Mary Latham was instrumental in the set up of MyDeposits so I suspect her advice is good but if in doubt always get advice in writing from the scheme provider. I have also had lengthy debates in the past with Industry Observer and we have worked our way through the various legislation on these matters. He also makes a very fair point in his words of caution in this thread. Guest Author Julie Ford posted an article yesterday regarding confusion in tenancy deposit legislation. I must say it is a minefield, especially with different providers having different rules and their own interpretations of the law. If the deposit protection schemes themselves can't agree what chance do landlords and agents have on getting things right. The scary thing is, landlords are liable to pay four times the deposit back if they or their agents are wrong and possession will be delayed too.

Winsome P

9:32 AM, 13th February 2013
About 6 years ago

In the inflationary times we live in (I look at the prices in shops and think how they can only go up by 2.7% in a year) there is an age old clause to increase the rent inline with inflation once a year. Thus the contract has an automatic increase in rent included which is the only change. The advantage of having such a clause is that you do not have the renegotiations of rent each year, back dating or when the new rent becomes payable. Of course the letting agents would loath such an inclusion as there is no reason to involve them again! Nor deposit protection schemes however the increase is fair impartial and at least happens automatically. Arrears can then be simply calculated on a spreadsheet and the standing order amended which are generally only small amounts.
Ta darr

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