As a landlord how can I avoid using deposit protection?
There are more than a few things which tend to get private landlords riled. Rising interest rates, reduction in tax relief and increasing legislation are all guaranteed to raise a landlord's hackles. And understandably so. But another thing which irks many landlords is the deposit protection scheme or DPS. Which is altogether more surprising.
DPS - a brief refresher
There are only two rules private landlords need to remember about the deposit protection scheme:
- You must protect your tenant’s deposit in an approved government scheme.
- You must provide your tenant with prescribed information explaining the scheme within 30 days of receiving their deposit.
Pretty simple really. But the penalties for not complying can be serious.
- If you don't protect the deposit within 30 days your tenant can sue you. And they will win the case. You will be ordered to pay compensation of up to three times the amount of the deposit.
- You will be unable to serve a valid Section 21 notice.
- You must obtain the tenant's consent to withhold any money from the deposit. And why would they give that?
Why landlords don't like the deposit protection scheme
Of course, not all private landlords have a beef with deposit protection. But many do seem to resent it.
The main objection centres on the extra paperwork created by the scheme. Along with the change in the traditional method of a landlord banking a tenant's deposit and returning it at the end of the tenancy. It worked well for years so why change it? Which begs the question we're often asked. Is there anyway private landlords can avoid the deposit protection scheme?
It's a straightforward answer
If you're a private landlord letting your property on an assured shorthold tenancy you must protect your tenant's deposit. There really is no other answer. If you take a deposit you are legally obliged to use a deposit protection scheme. No matter how much you wish to avoid it.
Ok, there is an alternative if you really want one. And that is to simply not take a deposit at all. Which is rather like cutting off your nose to spite your face. Why would you do this? You lose all the protection a security deposit gives you.
No. As a private landlord, you should take a security deposit from your tenant. And you must protect it in a deposit protection scheme.
The reluctance of some landlords to embrace DPS is a little puzzling. After all, it's not as if deposit protection is a new thing. The legislation has been in force since 2007. That some landlords are not aware of it or still refuse to embrace it is a little alarming.
Yes, it involves a little extra paperwork before and after the tenancy. But at the end of the day, it does its job. If a tenant damages your property you will be able to make a deduction from their deposit to pay for the damages. Though admittedly there are some hoops to jump through.
Nevertheless, the deposit scheme isn't that much of an imposition to landlords. And if you wish to take a security deposit from your tenant you have no other option than to lodge it with a deposit protection scheme.
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