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Deposit Protection

First, I need to write that this article is not meant to act as legal advice in any way, shape or form.

We don’t think the law around the holding of deposits is particularly complicated, but we are certainly not qualified to give it advice.

The law/rules/guidance around what you can and cannot withhold from a deposit is, well, almost entirely subjective and frankly a can of worms (here is the advice the tenants are getting – link below).  

So, the purpose of this blog is a discussion of the nature of deposits and highlight what you should be aware of and possibly do more research into you can do that >>here<<.

 

Should I even bother to take a deposit?

Yes, you absolutely should…….. DEFINITELY!!

OK, so it almost goes without saying that a tenant can cause far more damage than will ever be recovered through the withholding of a deposit.

In many ways, the monetary value is secondary to the commitment to the property and superior financial management that the tenant is displaying in getting the deposit together.

Frequently the first question you’ll get asked by the tenant when they submit their Notice to Quit, is ‘when will I get my bond back?’.

It is quite clearly in their mind, and if that thought holds during the tenancy and they take that little bit of extra care with your property, then you are onto a winner.

The tiny bit of extra daily care that a tenant may take with your property will add up and, although I will never be able to prove this, I believe you will have fewer issues with tenants if you take a deposit.  And if that is too woolly and ethereal for you – well you have the cold hard cash from the deposit to cover any repair costs.

How much should I take?

Amount taken tends to be relative to the rent the equivalent of somewhere between 1 to 2 months.

However, there are a number of reasons why you would want to take a bit more; if the tenant wants to have pets, if the tenants are foreign and a greater potential to skip payments at the end of a tenancy are but two examples.

There is no right or wrong (although as at December 2018 the Labour Party are pushing to have an upper limit on the deposit – so watch out)

So that’s easy, I’ll take a deposit.  Now, what shall I do with the money?

Simple – register it with or submit it to a government-backed scheme.

Tenancy deposit protection was introduced on 6 April 2007 as part of the Housing Act 2004 and updated in the tenancy deposit provisions (section 184) of the Localism Act which came into effect on 6 April 2012.

Much of the justification for the acts was the sharp practices by some landlords predominantly betterment.  Betterment (made up word alert?) is the practice of spotting a small defect and then using it to justify making the property better at the tenant’s expense, for instance, a small mark on a wall could be used as a reason to re-decorate a whole room or house.

The deposit schemes are meant to bring greater parity between tenants and landlords about what the deposit monies can be used for.

Has it worked? We have no idea, but it certainly has changed the relationship and also created a new opportunity for the no win no fee lawyer if the deposit is not correctly registered and the correct paperwork served; You have 30 days from receipt of the money so act quick.

What is this ‘Deposit paperwork’?

The details of what paperwork needs to be served will be available on the scheme’s website, we haven’t listed the requirement here for fear of going out of date and thereby being misleading.

Broadly, it is a document that tells the tenant about which scheme you have used (the prescribed information) and T&Cs/leaflets that give greater depth of detail about the scheme.

To register or go custodial?

The schemes offer two options; in the custodial scheme the deposit is paid the money into a third party account managed by the scheme and registering the deposit involves the payment of a fee to register the deposit which is then held by the landlord/agent.

Which scheme is better?  Only you will be able to decide as it is very much linked to how you manage your affairs and the types of tenancies you have.  Bear in mind that you can use different schemes for different deposits if you so wish.

At the time of going to print the following providers were available, these are the only government schemes available, easily found on google.

  • Deposit Protection Service (DPS)
  • Dispute service (TDS)
  • mydeposits

Were all done then?

Yes and no.  It is also important to ensure that you complete a detailed condition report (inventory) of the property.

This should be a combination of at least a written report and photos; taking videos is also commonplace.

The inventory should be completed with the tenant prior to the point they move any of their belongings and must be signed off by the tenant as a true and accurate (It also is good practice to get them to witness the testing of fire and carbon monoxide detection equipment and take the meter readings at the same time, but we have now strayed to a different subject matter!)

The inventory will then form the basis of any future claims against the deposit if the tenant disputes any monies that you intend to withhold.

If you are not feeling confident, then you can use an inventory service.

You are not tied to this service forever, and it could be quite useful to get them to draw up the inventory in the first instance anyway!

Last words.

Play it by the book.

Ducks in a Row rendered

Systemising Your Property Business

As soon as you start your property business you should be concerned with making it as efficient as possible. The best way to do this is to systemise your approach. We have laid out an overview of how to achieve this which we hope will give you a clearer idea of the what, where, how and why?

Are you crazy? I don’t have a business, I just have a couple of rentals?

Even if you currently only have one property and don’t intend to go any further; you should still treat it like a business otherwise it will turn into an unwelcome hobby. Nobody knows what the future holds neither of us thought we would be sat here 12 years on writing blogs, delivering training courses, running property management companies and reaping the rewards of a passive income through property investing.

The aims of systemising are to make the management of your business quicker, easier and more consistent.  You should do this even if you do in-fact only have one property…… currently!!.

  

So how do I start?

Following a meeting at WOPT towers, we produced the diagram below to show my headline processes.  Each of these processes can then be broken down into a series of activities, we use a checklist to track what should be done next and keep an overview on progress.

Each process will have associated documents; be it letter/email templates, notices, reports etc.  The first one you write, copy or ‘benchmark’ will become the template which you should store somewhere safe and obvious in order that you can use it next time; at which point you will no doubt improve it and so on.

Sounds straight forward.  Can I have a look at your checklist?

Of course, he is a sample from the end of tenancy process – to see what other checklists are available, click here

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     Related Documents

1.      Informed of tenant’s intention to quit. 
2.      Collect the signed Notice to Quit receipt from the tenant.    Notice to Quit form
3.      Deliver a rent statement and check-out letter to the tenants.

    Check out letter

    Rent statement

4.      Initiate the Letting Checklist for the property. 
5.      Agree date of the check out meeting with the tenant. 
6.      Print up to date rent statement. 
7.      Collect the check-in inventory and the property keys. 
8.      Conduct the end of tenancy meeting    End of tenancy report.

This all sounds very stone age – is there an app for that?

We recommend never using tablets or stone to document your system because other than the obvious weight issue any system should constantly be reviewed and improved.

There are numerous property management applications, and it is becoming more common that they are scalable, so you don’t need to pay a hefty monthly payment whatever the size of your portfolio.

We won’t recommend a particular package as selection depends on what your criteria is both now and how you see your business developing in the future.  Needless to say, there are numerous articles on property forums and websites that recommend applications based on the author’s view of the world.  Just make sure you are GDPR compliant!!!

One of the experts at WOPT Towers uses Excel for just about EVERYTHING, (pretty sure he creates his shopping lists on it), and it works well for him so as ever there is no right and wrong… Other than NOT systemising.

Sounds really simple, anything else?

Well no, not really, it is that simple when you break it down but it is remarkably effective in achieving the aims of making business quicker, easier and more consistent.

Property Training at WOPT

Here at WOPT we only offer responsible and ethical property training.

We believe firmly in transparency and will never sell you the dreams of yesteryear and never try to guide you to the impossible. We believe firmly that success is a journey and NOT a destination and that setting impossible targets can be counterproductive.

We believe in honest, straight-talking guidance, that’s why our training courses have become the best around because we genuinely care about your success.

We are so confident in our unique and personal approach that we even offer a no quibble money back guarantee.

All our articles are for information purposes only, and we ALWAYS advise you to use them as part of the overall picture building process and not as your sole reference point