Council Bond in place of deposit?

Council Bond in place of deposit?

9:31 AM, 17th October 2022, About A year ago 9

Text Size

Hi Everyone, My question relates to council bonds and if they are legally categorised as a deposit?

I ask because a legal cash deposit is capped at 5 weeks under the tenant fees ban, but would a council bond fall under the same regulations?

If the Council offered bond comes to more than the standard 5-week rent cap would this be considered a prohibitive payment?

Is it possible I could be set up for a fall and fine or rent repayment order?

Many thanks


Share This Article



11:52 AM, 17th October 2022, About A year ago

I need to follow this as I'm in a similar situation

David Houghton

12:20 PM, 17th October 2022, About A year ago

Not sure on the cap thing. You could check on the legislation.

However. It is a contract between you and the council. In my area this contract lasts as long as the protected period (usually the initial 6 months). If there are problems after the first 6 months you are not covered.

Further they may also require extra bits and pieces. In my area they required an electric safety certificate long before it because law ( but council (social) housing was exempt.

So be careful what you agree to, document it and ideally get the council to confirm what's agreed.

Amen Bundred

12:46 PM, 17th October 2022, About A year ago

The bond is not limited as no cash changes hands. Most council's offer 3 month bonds. I have accepted bonds in the past and Successfully claimed on them.


12:48 PM, 17th October 2022, About A year ago

From my experience, although some time ago. What the councils thinks as a Bond is less than 5 weeks rent as their thinking is that the market rent is a lot less that it really is. (my tenant made up the shortfall in rent her self) It worked well as then I had found a really good tenant, although on DSS.
Then the bond only lasted one year and not renewed. Maybe different now but advise you speak in detail with the council. Bare in mind the 6 month evection notice may well be coming our way as in Wales.
NB. Watch out for the Shelters & Generation Rent herbet's as they will have their own mischievous views on council bonds.

Reluctant Landlord

13:03 PM, 17th October 2022, About A year ago

Reply to the comment left by Amen Bundred at 17/10/2022 - 12:46
so far the Bonds the LA have given in the past are limited - they tend to cap them at the same 5 week deposit amount.

I just need to establish once and for all if a Bond IS regarded legally as a Deposit or not. I am quite happy to take a Bond from the LA either for unilimited value for arrears. damage etc (do these even exist???) OR one a higher one over the 5 week deposit amount BUT wondering if this would be regarded as a breach of the prohibited fees?

David Houghton

13:20 PM, 17th October 2022, About A year ago

Housing act 2004. S 212

Uses the words "any financial obligation". Read into that what you will.

Seething Landlord

13:22 PM, 17th October 2022, About A year ago

You need to check the wording of regulations to be absolutely sure but it seems to me that a council bond is in the nature of a guarantee rather than a deposit.

The restrictions on fees chargeable to tenants are designed to protect tenants rather than guarantors, who in the normal course of events have an unlimited liability. This liability can of course be limited by agreement which is what I think local authorities are doing when they issue a bond for a specified amount.

It is not dissimilar from the no deposit insurance backed option.

Robert M

13:46 PM, 17th October 2022, About A year ago

A "Bond" from a council is usually limited to a set amount and is usually provided as a substitute for a cash deposit, i.e. if tenant leaves with rent arrears then you can ask the council to pay the rent arrears up to the (limited) amount of the Bond agreed.

A Deed of Guarantee is, I believe, entirely different in as much as it is not usually (if worded right) limited to specific costs (e.g. rent arrears), is not for a limited duration, and is not limited to a maximum amount. The "Guarantor" effectively takes the financial responsibility for all the debt (howsoever caused) of the defaulting tenant.

I am not aware of any council that offers to be a Guarantor, but many do offer deposit bonds, but they are usually limited (both in terms of the circumstances in which you can claim, and also in terms of the financial amount that can be claimed). However, I am not aware of any caselaw that would assist you in defining the maximum amount allowable as a deposit bond, so I would suggest getting the offer in writing from the council, and then scrutinising the small print.

Reluctant Landlord

15:52 PM, 17th October 2022, About A year ago

Reply to the comment left by Robert M at 17/10/2022 - 13:46thanks Robert. Up to now I have had a deposit bond with one council. It was capped at 5 weeks rent equivalent as the most I could claim against in the case of rent arrears damage etc. Essentially like a deposit only no money changed hands.
The council required form the tenant as part of THEIR direct contract with them that the tenant pay the value of this back over 2 years to the Council. If the tenant paid the council back after 2 years the Bond was then 'cashed in' and the Council sent me the total amount and I then I went through the normal deposit procedure and serving PI etc as the deposit was 100% the tenants.( The idea was that now the tenant has paid for this it was their money so they would be a responsible tenant. - nice ideal ;0)
In one case where the tenant did not pay the council back the full deposit amount by year 2, they extended this for another year, but at year 3 when he had paid all the deposit, again the money was transferred to me and I deposited as per normal.
I;m just wondering about the 'legality' of asking the same council now (as I have had flats come up) if they could issue a Bond instead for say £1k each flat. Again I have no deposit, they have no admin in regards to getting tenant to pay it back to them, but at the end they would receive back directly any monies not deducted for arrears damage etc.
From the council perspective this is zero admin, and they get to retain anything not deducted etc and at the same time they get a tenant off their emergency housing list. Financially its a no brainer
with em accommodation B&B costs.
Anyone else had anything similar?

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now