Benefits of taking Deposits

If you take a deposit in respect of an Assured Shorthold Tenancy you are legally obliged to comply with all components of the Tenant Deposit Legislation. Including providing the Tenant with the prescribed information. Failure to comply exposes you to penalties and fines, the inability to make deductions and possible issues regaining possession of your property.

If you do not take a deposit you could increase your potential loss as you have less security in hand. Taking a deposit serves two main purposes:

1) Demonstrates the Tenants' financial ability to raise funds.
2) Psychological - Tenants are more inclined to look after your possessions IF they fear loss of their deposit.

When the deposit legislation was first introduced in April 2007, many Landlords were caught out, fined and or suffered serious delays in securing possession of their property. Subsequently there have been several cases where Landlords have successfully appealed such fines. The most notable being:

Bamford - The removal of the mandatory fine for failing to issue the prescribed information within 14 days.
Panels – Mandatory fine for failing to protect the deposit within 14 days.
Both cases relied on the definition prior to the court hearing, as contained in the prescribed information statutory order. So if you have a problem remedy ASAP, otherwise the case law may not benefit you. Note: neither case protects you from a Section being deemed invalid.

Where you take a deposit you MUST comply with the Tenant Deposit Legislation. Attempts to circumnavigate have more downsides than upsides and many types of council are now challenging the previously used Two Months rent in advance.

Taking deposits of less than £400 is simply putting an unnecessary burden on you; the risk reward ratio of compliance is simply not worth it. Where your tenancies are of such value you are advised to:

Charge 6 weeks deposit provided this does not put you at a disadvantage.
Charge an Administration fee for commencing the tenancy where you recharge vetting tenant tracing.
Promote NO deposit as a competitive advantage; this may minimise rent void period; provided you have a guarantor.
Where you do take a deposit you must remember there are Fines and sanctions for non compliance.

You must register the deposit within 14 days otherwise you could