Matthew Posted March 5, 2007 Report Share Posted March 5, 2007 I have several HMOs, so the deposits are slightly different to the norm, in that each individual deposit is rather small. Any damage one person does could cost way over the £300 deposit. Any damage to communal areas would be too complex and time consuming to sort out, so I wouldn't expect to withhold the deposit even if communal areas were damaged. In my opinion, I would usually not bother keeping the deposit even if damage had been done, due to time and costs and delays in renting the rooms back out would far outway the deposit. It's much quicker to get the tenant out, sort the problem, relet and not have to worry about court etc. However, deposits are a good thing, as the tenant always thinks the Landlord is looking to take the deposit and thus looks after the property better than if there was no deposit. Also when buying a property, there are a lot of costs, refurbishing and furnishing. The £1,500 to £2,000 per property in deposits is a welcomed cash inflow. I am keen to keep hold of the money, which from what I've read would mean an insurance scheme. I do not think it is fair for me to pay another charge, especially as I always give the deposit back, I've read it may be £30, especially as turnover is quite high in the HMO area. Are most people looking to charge the tenants for this? The other option is to charge two months rent in advance, but I am not keen on this as the tenant will then know that I cannot withhold the money legally as it is not a "deposit". Another win for Red Tape! Link to comment Share on other sites More sharing options...
Trenners Posted March 5, 2007 Report Share Posted March 5, 2007 Hi Matthew, I'm not sure why you are keen to hold onto the money if, by doing so, you are going to incur a £30 fee per deposit by joining the insurance scheme! Whichever way you look at it - once this new legislation is put into place then landlords are going to lose control of their tenant's security deposit money because the dispute resolution service is going to have the final say on what deductions are fair etc etc. I would have thought the custodial scheme would be a better option as it is free to use (for both landlord and tenant). You could try and charge the tenant £30 and join the insurance scheme but I'm not sure what value the tenant gets from paying that fee (especially when they learn that the custodial scheme was free). If there is a dispute with your tenant, at the end of the tenancy, then you are going to have to lodge the disputed amount of security deposit money with a custodian irrespective of which scheme you join. I will be using the custodial scheme ...... Good luck, Mark Link to comment Share on other sites More sharing options...
SPEEDTWIN Posted March 5, 2007 Report Share Posted March 5, 2007 Hi Trenners Could you tell me who are running the insurance scheme and is it £30 as a one off or everyyear? I suppose you would have to pass a lot criteria to be excepted ie clients a/c, insurance etc thanks Link to comment Share on other sites More sharing options...
Trenners Posted March 5, 2007 Report Share Posted March 5, 2007 Hi Speedtwin, There are two insurance based schemes - one run by "The Dispute Service" and aimed at letting agents - and the other run "Tenancy Deposit Solutions" and operated by the National Landlords Association (NLA) - aimed at landlords and letting agents - more information can be found on the NLA scheme at http://www.mydeposits.co.uk. In summary, for landlords, the joining fee is £58.75 (inc VAT) and they then charge £30 per Security Deposit insured. There is a paltry discount for NLA members of £4 (for the first 4 properties insured). There is also an annual membership renewal fee of £14.70 (inc VAT). The custodial scheme is free to use. The fees, being charged by the NLA scheme, make it more economical for landlords to move their deposit into the custodial scheme as the amount of interest gained by holding and investing the security deposit is unlikely to cover the premiums being charged to join the insurance based schemes. Let me know what you decide to do ..... Mark Link to comment Share on other sites More sharing options...
Matthew Posted March 6, 2007 Author Report Share Posted March 6, 2007 Hi Trenners, Thanks for the reply. The only reason I want to hold onto the money is for cashflow purposes. I will have to have a think about it. Regards, Link to comment Share on other sites More sharing options...
gibson little Posted March 16, 2007 Report Share Posted March 16, 2007 Hi - at last I feel as if I am talking to someone in the same situation as myself! We rent rooms in HMOs and take just 2 weeks rent as a deposit. The insurance based scheme would have cost us about £6000 in fees last year - most of our tenants are migrant workers who sign a 6 month cotract but then leave without notice and before the 6 months is up. So why not use the costodial scheme? Not only is it a question of cash flow but also what happens when the tenant cannot be contacted to submit a claim? I feel thooughly pissed off by the whole situation - we must be doing something right as many of our tenants come through recommendation but we are being punished for the behaviour of a few rogues who will undoubtedly still find a way round the law. Can we pas sthe costs on to the tenants? Link to comment Share on other sites More sharing options...
resident Posted March 16, 2007 Report Share Posted March 16, 2007 Great news, landlords can now avoid the cost and hassle of joining a tenancy deposit protection scheme by accepting tenants that belong to the Tenant Guarantee Scheme. This offers better financial protection than a deposit, pre-screened tenants and at absolutely no cost to landlords. For details of this revolutionary new approach go to the schemes official new website www.iguarantee.co.uk. Link to comment Share on other sites More sharing options...
Trenners Posted March 17, 2007 Report Share Posted March 17, 2007 Hi All, I really don't understand all these comments about "cash flow". The Security Deposit money belongs to the tenant. The landlord should have been putting it in a safe place (and not using it to subsidise the running of their letting business). If you need cash flow then get a bank manager to authorise an overdraft. The only cost of using the custodial scheme is the lost interest from the deposit money. Mark Link to comment Share on other sites More sharing options...
gibson little Posted March 17, 2007 Report Share Posted March 17, 2007 Have been looking at custodial option which seems free other than the added time needed for the admin but does anyone know what happens if the tenant does a "flit" and so never signs the submission for the return of the deposit? Also can landlors make a charge to the tenant for the paperwork involved? We have a lot of tenants and so this could be quite time consuming. Link to comment Share on other sites More sharing options...
GPEL Posted March 17, 2007 Report Share Posted March 17, 2007 Just to highlight one of the comments about charging the tenants. Under no circumstances is the tenant to be charged for scheme costs, it's illegal. You may cover the cost in other ways but not directly from the tenant. Link to comment Share on other sites More sharing options...
SPEEDTWIN Posted March 17, 2007 Report Share Posted March 17, 2007 Hi GPEL Would it still be illegal if a LA who was charging say 550 pcm now charged 553 pcm for same property to cover costs and the £3 was listed as a separate charge on LL monthy statement??? Link to comment Share on other sites More sharing options...
gibson little Posted March 17, 2007 Report Share Posted March 17, 2007 If you dont recover the cost from the tenant what other ways are there of recovering the cost? It is an overhead and if Tescos overheads go up they pass the cost on to their customers so who decided landlords were different? Link to comment Share on other sites More sharing options...
Trenners Posted March 17, 2007 Report Share Posted March 17, 2007 This will be controversial .... but here goes .... The Tenancy Deposit Schemes have been implemented by the Government to protect the tenant's security deposit money from "evil landlords" who unreasonabley withhold it. This is a new piece of legislation that has been introduced to regulate landlords NOT tenants. Any costs and time associated with these deposit protection schemes should be borne by the landlord. I know that the majority of letting agencies, including mine, will be charging their landlords for providing and administering the tenancy deposit schemes on their behalf. We will not be charging the tenants anything. We are going to move all of our tenancy deposits into the custodial scheme as this will be, by far, the most cost effective way of implementing this legislation because businesses can only get about 2.5% interest per annum from a client deposit account (and it will be cheaper to move the money and lose the 2.5% interest than pay the insurance premiums to insure the deposits and keep the interest). I totally agree with GPEL - the tenant should not be charged for administering or providing tenancy deposit protection. If the greedy landlords hadn't used their tenants deposits for their annual holidays in the Maldives in the past then the Government would not have needed to introduce this legislation to protect the tenants money. With regard to the question about "what happens if the tenant does a flit" and doesn't sign a submission for the return of the deposit from the custodial scheme - here is the answer from the custodial schemes web site: "If one party cannot contact the other, they can submit a 'single claim'. However, in the case of the tenant being uncontactable, the landlord must include evidence why the claim is not a joint one". "If one party refuses to co-operate, either in agreeing the release of the deposit or agreeing to resolve any dispute, a single claim can also be made". Mark Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted March 18, 2007 Report Share Posted March 18, 2007 This will be controversial .... but here goes .... The Tenancy Deposit Schemes have been implemented by the Government to protect the tenant's security deposit money from "evil landlords" who unreasonabley withhold it. This is a new piece of legislation that has been introduced to regulate landlords NOT tenants. Any costs and time associated with these deposit protection schemes should be borne by the landlord. I know that the majority of letting agencies, including mine, will be charging their landlords for providing and administering the tenancy deposit schemes on their behalf. We will not be charging the tenants anything. We are going to move all of our tenancy deposits into the custodial scheme as this will be, by far, the most cost effective way of implementing this legislation because businesses can only get about 2.5% interest per annum from a client deposit account (and it will be cheaper to move the money and lose the 2.5% interest than pay the insurance premiums to insure the deposits and keep the interest). I totally agree with GPEL - the tenant should not be charged for administering or providing tenancy deposit protection. If the greedy landlords hadn't used their tenants deposits for their annual holidays in the Maldives in the past then the Government would not have needed to introduce this legislation to protect the tenants money. With regard to the question about "what happens if the tenant does a flit" and doesn't sign a submission for the return of the deposit from the custodial scheme - here is the answer from the custodial schemes web site: "If one party cannot contact the other, they can submit a 'single claim'. However, in the case of the tenant being uncontactable, the landlord must include evidence why the claim is not a joint one". "If one party refuses to co-operate, either in agreeing the release of the deposit or agreeing to resolve any dispute, a single claim can also be made". Mark It is all very well submiting a single claim but my understanding is that without agreement from both parties or arbitration or court order the funds will not be released which leaves you back at square one waiting to go to court ! Why should the landlord bear the cost from his pocket ? I run several businesses and if an overhead goes up, then somewhere along the line the customer is going to get charged for it ! When the mortgage rate starts soaring i would think rents will actually go up to cover this or does the landlord swallow this as well ? As we enter a new arena of rules we need to change our proceedures to accomodate them - i for one will be charging the tenant for any increase i have in overheads to maintain margins. Whether it gets called rent or set up fee or ref fee or admin fee or whatever is irrelevant ! I am not ashamed to say that the goal of my business is to make a profit not swallow as many costs as i can and see if i can survive! I have 90 tenants and will always have a percentage who will your have your trousers down at every available opportunity. Link to comment Share on other sites More sharing options...
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