NEW Deposit Scheme- OTHER OPTIONS ?

[Simon Dewsberry]

Hi All

As i understand it - the new rules on Bonds/Deposits apply ONLY to AST leases ?

If this is the case then it would appear that the simplest way to avoid getting involved the choas that is about to ensue would be ; to not grant an AST lease but use an ASSURED TENANCY - have never used one and really don't know an awful lot about them.

My preliminary research would suggest that the only real difference is that it is a lot harder to regain possesion of the property - meaning that you need a very good reason for judge to order them out - but the only reason i personally want anyone out is for anti-social behavior or non payment of rent - these would both appear to be strong grounds to regain possession.

The only problem i can really see is a lot of mortgage conditions stipulate that you must grant an AST only

but havent trawled thru mine to check yet.

Any one have any advice on this ?

Simon

[Trenners]

Hi All,

The new tenancy deposit laws do only apply to ASTs but I am sure other forum members will advise that an AST is the best vehicle to establish a residential tenancy because of the ease of respossession.

The best way to avoid the new legislation is not to take a security deposit from the tenant on or after 6th April 2007 and, instead, perform much more robust referencing etc. This is the underlying principle of the "iguarantee" solution offer by the Residential Landlord team and I think the idea is good.

If, at the end of the day, I am going to have to lodge the disputed deposit with the tenancy deposit protection scheme administrator whilst I take my tenant to court to gain compensation for the damage that they have caused to my properties ... I might as well not bother taking a deposit from the tenant in the first place !

Mark

[GPEL]

I think that Housing Act governance seeks out evasion of the requirements to protect deposits. If the tenancy to all intents and purposes should have been an AST, it will be judged under the conditions of one and "errant"landlords consequently dealt with more severely.

[Simon Dewsberry]

Hi Mark -GPEL

No Doubt that an AST is by far and away the safest and "best" way, if the not the only sensible way to let.

But as with all investments and busines deals the whole picture must be considered on a risk/reward basis.

To remove a potentially huge amount of admin time and keep control /minimise risk - I believe it is worth investigating alternatives!

From my understanding the Landlord is entittled to issue an assured or ast but must inform the tenant of which it is !

The iguarantee is going to cost the tenant " a small monthly fee" How much ? will tenants be prepared to pay it ?

There will be plenty of people who cannot get on to the ig scheme - I shouldn't think any HB tenants will be allowed for instance ! or anyone not on a permenant employment contract etc basically anyone who is high risk to them will be high risk to landlords ( you know the very ones that cause all the problems ! back to square one then !)

I hold approx £30K in bonds - now without this, repairs are going to become a financial burden as i will have to pay for the repair/damage.

Okay i can afford to do it -but why should i and what of a newbie who cant ?

Done some more research on ASSURED Tenancies and there are 17 grounds for eviction which pretty much covers most problems - also some of the notices are 2 week NOT 2 month as with AST's - which has potential advantages in time /money savings !

There is always more than one way to skin a rabbit - I have had many 100 's of tenants pass through as have my aquaintances, and none of us have ever had to take a tenant to court -

Due to :

1 Using proper referencing - Guarantors

2 A watertight lease

3 Regular inspections

4 Make arrears get expensive quickly(as a big deterrent)

5 Identifying problem tenants quickly and acting on problems quickly

6 By using debt collection companies immediately - not as the vast majority do - bailiffs far too late!

7 This is your Asset look after it properly - it is a business -run it like one!

If you picked up your week's shopping from Tesco would they let you leave the building and pay next month ? no course not - they act immediately upon that sort of situation.

Having said all of the above there are still going to be nightmare tenants and situations which with the best will in the world cannot be avoided - but we have to reduce this to a minimum.

One of my favorite lines to a tenant when things get a little heated is

" what would you be saying to me right now if it was me that owed you a grand and you were overdrawn because of me ? and what would you do about it ? would you be able to sleep at night ?"

Sometimes has the desired effect !

I think like everything in life, it is going to be "horses for courses"

The vast majority of part time Landlords with smaller Portfoilios would be well advised to "follow the herd" and just use the "custodial scheme" or even just leave it to the management agent to sort.

Strangely- Unconventional people tend to earn unconventional incomes - at lot of this is as a direct result of using unconventional thinking and unconventional methods.

Personally i will be raising my reference/set up fee by approx £35 accross the board to cover extra costs on the occasions where i use the INSURANCE SCHEME

- Using an Assured Agreement in the "right " situation and doubt that i will touch the custodial scheme at all.

The vast majority at present will be signed as ASSURED - fixed term not as AST for me ! as non payment, damaged prop , upsetting neighours are all evictable offences and the procedure is almost identical to AST 's

Anyone see any problems with this ?

Simon

[GPEL]

Simon, a great bit of thinking out of the box. If there's a loophole, it'll be found. At least until the next Housing Act review that is.

I often use the put yourself in the landord's position line. However, there's always the one who at the end of a tenancy objects to being told the grass needs cutting yet owes 3 months rent. Nowt as strange as folk...

[roppa]

interesting point of veiw simon,

as all of the legal jargon i have been reading through is in reguards to AST's VS AT's...

the main problem i see with it is the buy-to-let market. virtualy EVERY mortgae lender i deal with want's a AST at the start of the purchasing of the property from the vendor, and also if you refinance the property.

now, the thing is that if you are happy with the tenant, and do not intend to refinance the property any time soon.

AT's might be the way to go...

but i would say that there is a very grey line in reguards to if the change in law covers ALL deposit's taken, or if it is just purly for AST's deposit's taken.

going to have another trawl through the information at hand and see if there is anything specifically saying that "if you take a deposit, reguardsless of tenancy type, you have to register it"

but at first glance, i really can not see them leaving open such a hugh loophole.

but then again, it our government we are talking about here.

[Simon Dewsberry]

Hi Roppa

Re financing was an issue i hadn't considered - and will present a big problem ! as at the very least an AT is going to restrict your options somewhat and a careful definition of what is the "right" property to put an AT is going to have to be decided.

Work still in progress then - must say there are a few ideas and points been raised on the forum over the past few days which i will probably incorporate into the new "super lease " regardless !

Any one else got any ridiculous suggestions we can kick about !

As Delhia Smith once eloquently put it "C'mon let's be 'aving yu!!"

Simon

[GPEL]

Ridiculous idea for contemplation. For certain, apparently good, candidates, what about not taking a deposit from them and say refunding half of the last month's rent if the property is up to scratch, to an agreed standard. Gives an incentive but has a risk.

[kerbut]

I have been following this thread with great intrest, I intend to charge the 2 months deposit I always do,put the money in the Tenancy Deposit Solutions scheme and to cover my costs charge on top of the deposit a£ 35 "referancing fee" .

[Simon Dewsberry]

HI GPEL

"Ridiculous idea for contemplation. For certain, apparently good, candidates, what about not taking a deposit from them and say refunding half of the last month's rent if the property is up to scratch, to an agreed standard. Gives an incentive but has a risk."

Not to keen on that one ! I have nothing in the bin to cover problems and at the end i'm going to be out of pocket - okay if you get something to give back at the beginning though !

You have made an important point though as people seem to keep reminding me "rent is rent" & "deposit is deposit" and cash gift has tax implications So................(here we go again !)

Money taken at beginning under whatever "guise" or even "disguise" can be returned to tenant as "rent refund or rebate" which i would think legally does not fall into the "deposit" or cash gift definitions -and so would appear to steer clear of deposits (def:TDS)

we need a legal opinion on this anyone know ?

Simon

[BTLWhizz]

Hello all. I'm a landlord with three properties, all newbuild flats at time of purchase. No major problems so far.

I've been reading the discussions concerning the TDS with interest. I prefer to hold the deposit myself, as I am confident in my ability to be fair and reasonable, and by having control over the deposit, I know that my actions will be fair.

But I'm not sure that finding "tricky" ways to avoid the TDS will be beneficial in the long run. The better tenants I have had have been professional, and honest, people. They have all wanted to speak to me before agreeing to a tenancy, and I believe that I have given a good impression which has been important in their decision to rent from me.

If the first time they meet me, I am coming up with strange manipulations to avoid the TDS, is this not likely to create a very bad impression of myself, which is that I'm prepared to cheat, duck, and dive, to shirk responsibilities. I would be concerned that the better class of tenant would be put off by TDS avoidance schemes, and be less likely to choose my property.

Reading through the forum here, I'm shocked at the attitudes towards tenants. People mentioning tenants who avoid responsibilities, leave places trashed, and just "disappear". If I resort to "Del-boy" techniques to avoid the TDS, is this going to affect the quality of tenant I get by scaring off the reasonable, professional, tenants, and leaving the alleged "scum"?

[Simon Dewsberry]

Hi BTLWwhizz

Fair points you make and i agree but..............

I have this week just finished "repairing" a house from an A1 Tenant turn "badone" Rent paid on time - inspections of prop all okay -or so we thought !

After he left a closer inspection revealed a different story!

by the time we had cleaned the cooker, shampooed the carpets, replaced the 3pc suite, relaid half the flooring(just to replace 3 laminate boards)and got rid of all their rubbish, got a locksmith to sort out a patio door with a snapped key in it, put the garden fence back up, turned the back garden from a mud bath back to lawn, cleaned the curtains and redecorated the lounge due to holes from pics mirror and shelves we had a large bill as you can imagine.£1050

The tenant disputed everything except the carpet cleaning bill of £70 !!

The damages were just slightly more than the bond but the tenant has packed in his job and left the area - apparently -and refused to give us a forwarding address -saying that he had put a redirect on post so send the deposit cheque to "my" house !

Since he has left it has become apparent that the council tax and all utilities were put into my name and have not been paid for the 6 mths that they were there! The only point of i have is a mobile no which he refuses to answer to me - i sent a strong letter to my address - which did not get redirected as i collected it back from my property yesterday!

Now fortunately there is only £100 outstanding which I don't like to lose but if the debt collector cant find him then i will.

If this had to be sorted through "TDS" I would not be looking forward to it!

For this to happen to me is rare - but the "bad ones" are out there and with "TDS" -situations like this are going to be expensive in terms of time as well as money to retreive your cash.

It must be saidd though- that with the vast majority of tenants like 99% in my case you dont even need to take a deposit as they are resonable people and will sort problems fairly and promptly- the only problem is we dont know which ones they are!

Simon