The tenancy deposit and the tenancy agreement
It is fairly common for landlords to take a deposit. This gives the tenant an incentive to look after the property as if he does not, he will lose his money.
Background to the tenancy deposit protection regulations
Prior to the introduction of the tenancy deposit rules in 2007, many landlords (not all but a substantial minority) failed to return deposits, sometimes making up fictitious damage claims to justify retaining the money, or in a few cases just refusing point blank to return it.
The only way tenants could enforce payment was by obtaining a county court judgement – not something that the majority of tenants felt comfortable about doing. The courts are for many people an intimidating place.
About the tenancy deposit regulations
This situation changed in 2007 with the coming into force of the tenancy deposit regulations. There have been a couple of amendments to the regulations since then, but basically
- Landlords are required to protect all deposits for assured shorthold tenancies, with an authorised scheme, within 30 days of receipt of the money.
- Landlords must also serve a notice on the tenant containing prescribed information, again within 30 days.
- The three schemes all provide a free arbitration service in the event of a dispute regarding deductions from the deposit at the end of the tenancy
- There are penalties for non-compliance.
These are all explained in detail elsewhere on this site.
The main thing to remember is that the deposit must be dealt with promptly – as no exceptions can be made to the 30-day rule under any circumstances, however unfortunate.
When the Tenancy Deposit rules do not apply
The regulations only apply however to assured shorthold tenancies. So, for example, they will not apply where:
- The tenancy is an unregulated or ‘common law’ one. See more about this on Day 4
- The occupier has a residential license rather than a tenancy – for example, lodgers and people renting accommodation on boats. See more about this on Day 3.
Tenancy Deposit Clauses in your Tenancy Agreement
It is important that your tenancy agreement provides for deposits. The most important reason being that if there is no clause setting out what deductions the landlord is entitled to make, he is not entitled to make ANY deductions.
The deposit money belongs to the tenant and landlords can only make deductions where this has been authorised by the tenant – for example via a clause in a tenancy agreement signed by the tenant. Failure to have such a clause or indeed a tenancy agreement at all is a common reason why landlords lose at adjudication.
Most professionally drafted tenancy agreements will contain suitable clauses. There are also draft clauses published by TDS which can be used. These are the clauses used in the Landlord Law tenancy agreements.
The tenancy agreement can also usefully include a clause providing for the tenant’s agreement to have any dispute decided by adjudication (as if the parties do not agree, any dispute can only be resolved through the courts).
Where tenancy deposits are paid by third parties
Often a deposit will not be paid by the tenants themselves but by someone else. The most common example of this is parents paying the tenancy deposit for their children’s student home when they are at University.
If this is done then the person who paid the deposit money should be named in the tenancy agreement and the deposit money should be returned to them rather than to the tenants.
The third party also needs to be named in the prescribed information which needs to be served on them as well as the tenants.
If you are unfamiliar with the tenancy deposit rules and want to learn more, this is a good post to start with. You will find a lot of other help on the site.
NB Find out more about my Tenancy Agreement Service on Landlord Law
There is also extensive information about landlords obligations under the regulations. Note that landlords who forget to protect the deposit money in time will find guidance in my Legal Kit – see below.