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I asked this question to the AOL but they could not answer it. A DEPOSIT is classed as a sum of money taken as security i.e. for damages NOT RENT. As someone signing an Assured shorthold Tenancy would be obliged (Under obligation ) to pay RENT So if it worded as 1st and last months rent in advance, and take a non refundable fee on signing an Assured shorthold Tenancy. State in the agreement the last months rent is not payable from when the tenant gives 1 calendar month notice to terminate. That would not class as a deposit.

Thus you would still have some money in the pot if they disappear, plus the non refundable fee that would cover at least the cleaning.

I think is going to take time and some court cases. I really don’t think Prescott’s office has got this under control, time will tell.

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Hi All

The new rules apply to DEPOSITS not RENT so as far as i am concerned.

you may take 1 , 3 , 4, ....12 months rent up front - this has no bearing on the deposit which is a completely seperate issue.

If the tenant then decides to pay every month as well leaving a "bank" of rent with you then i dont see any problem ( as long as everybody understands that this is rent and not to be used for damages etc) which particular months being paid can be negotiated with the tenant at the time of payment.

Although i must admit if i was in a situation where the tenant owed me money and i had credit on their account i would discuss the possibilty of using this to " balance the books with the tenant" and if they refused or neglected to pay for damage then i would use it anyway and take my chances in court - The point being that it wasn't taken or used as a deposit until such time as the "damage" bill had payment refusal from the tenant - If the tenant was going to take me to court then i would be making counter charges for the payment of bills - this all becomes academic and in reality - as long as the money is still in an account no charges other than refusal to return rent credit could be levied !

personally when faced with this i will take my chances in court - proving that i still have the money and what i am holding is exactly equal and opposite to the amount that they owe me!and as already stated has not been misappropiated as security funds but rent not yet returned until damage bill has been paid.

Grey enough not to be clear to tenant court or me ! so until iy gets to court one could claim that they were acting in the interests of the law ! Plus if you get summons pay it back immediately then leave your prosecution case to run or debt collector (my preference to collect damage bills plus costs-lots of costs) - when put to tenant this wll almost certainly get resolved long before court action is neccesaary but i my experience a whole lot easier when you are already holding the cash.

Personally i am taking 2 months upfront (1st and last mths rent and holding deposits on whole properties - ins scheme and using free scheme on smaller depoisits <£400 on rooms) also taking £100 as ref/set up/inventory/lease fee - which gives me around £50 spare to cover cleanig at end if necceassy _That still makes it far cheaper than a high st agent's fees!!

If i am going to lose a tenant over £50 i will discount it to get them !!

I don't really see any problems other than the deposit scheme administrators cocking their end up which they undoubtably will!!!

A non refundable setup fee is exactly what is says it is - so why should this be confused with a deposit ?

Any cash "back" is highly questionable as it implys "deposit" a cash "gift" however is a different matter altogether especailly if used in conjunction with "the tenant acreditation scheme" (look back over previous threads for details !)


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Hi all

Whilst you will all be aware that I am a Chartered Tax Adviser, I should point out that legal issues are not my field, however, I have run the idea of 'refundable administration charges' and 'cash back schemes' past a couple of my contacts who are knowledgeable of the TDS (I should mention that they are not solicitors). Their opinions are as follows:

Cash Backs and Refundable Admin Charges on the termination of a lease are 'deemed deposits' and are therefore subject to the TDS scheme and therefore must be dealt with correctly through the TDS system, therefore they will not 'duck the system'.

Rent in Advance cannot legally be used to 'make good' a property, so therefore rent in advance in place of a deposit doesn't not benefit the landlord in this way. Whilst no deposit would mean no TDS, it would also mean no deposit = where is the incentive to return the property to its original state.

Incidentally, any admin charge taken at the beginning of a tenancy (so under the 'cash back' scheme) would be taxable on receipt, only getting relief again if the administration charge iis returned. Therefore whereas you once had a 'deposit' which was not taxed (unless part was kept to cover the expenses of making good a property), you would now have an administration charge - taxable in full. On a £500 administration charge, that could be as much as £200 in tax... so be very when considering a cash back scheme!

So the answer? I think it is 'comply' - particularly given the penalties in place for non-compliance



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