Home > What Is The Best Way To Collect Deposits From Tenants?

What Is The Best Way To Collect Deposits From Tenants?

If you’re a private landlord with tenants on assured shorthold tenancies you’ll probably take a deposit. You don’t have to do this. There’s no legal requirement for a landlord to ask a tenant for a deposit. But it’s a sensible safeguard and there can’t be many landlords who don’t do this.

By taking a deposit the landlord knows the tenant has a powerful incentive to make sure they abide by the tenancy agreement. In other words, it ensures they pay the rent on time and will look after the property as if it were their own. If they don’t you can deduct money from their deposit at the end of the tenancy to make good any damages or pay for cleaning.

So, taking a deposit from a new tenant makes perfect sense. But there are deposit laws which landlords must abide by. Failure to do so can result in heavy financial penalties and even prevent you from evicting your tenant.

Deposit protection scheme (DPS)

DPS has been around for a long time. Yet many landlords, especially those renting their first property, fail to comply with the law. And it is a law. You have no choice but to protect your tenant’s deposit.

You can find more information about the deposit protection scheme here. But in a nutshell, the law demands:

  • You must protect your tenants' deposit with a government approved scheme.
  • You must provide your tenant with details of the scheme and how it works.

    The legal position is the deposit money always belongs to the tenant. As such it should be returned in full. However, the landlord can make deductions to pay for damage to the property. But the tenant must agree to this. If the two parties can’t agree an independent arbitrator will decide the issue and distribute the funds accordingly. The arbitrator’s decision is final.

    Not protecting the deposit can lead to financial penalties. The tenant can claim compensation. This could be up to three times the amount of the original deposit. In addition, the landlord will lose the right to serve a Section 21 notice on their tenant.

    Follow the deposit laws

    From the above it's plain to see why it’s essential to protect your tenants’ deposit. But it is yet another task for landlords to remember. One it’s easy to forget. Especially if you have multiple properties to manage. So, what's the best way to collect deposits from tenants?

    The simplest way is to delegate deposit protection to your letting agent. As part of the MakeUrMove Good Landlord subscription service, we collect your tenant's deposit for you. We'll then protect it with a deposit protection scheme and take care of the legalities. This delivers peace of mind for you and your tenant.

    Prefer to collect the deposit yourself? The signing of the tenancy agreement is the ideal time to do so. But you should immediately protect it with the scheme of your choice. Provide the tenant with details of the scheme and the prescribed information as part of their welcome pack.

    Private landlords can find tenants fast by listing their property with MakeUrMove the online letting platform bringing landlords and tenants together.


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