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PRIVATE LANDLORDS STILL FAILING TO PROTECT DEPOSITS

Martin Searle Solicitors’ Cate Searle explains why landlords need to sign up to a rent deposit scheme and the penalties for failing to comply.

Despite the law being more than a year old, many local landlords are still running huge risks by failing to register tenants’ deposits with an approved scheme. And the financial consequences can be catastrophic for the small buy-to-let landlord.

Since April 6 2007, landlords granting new assured shorthold tenancy agreements have needed to register deposits with one of three government-approved schemes. The purpose is to safeguard deposits and ensure they are returned swiftly at the end of the tenancy if there are no rent arrears and if the tenant has kept the property in good condition. Deposits are either held by a third party (under the custodial scheme) or protected by an insurance premium paid by the landlord (insurance-based schemes).

Thousands of landlords have signed up – either directly or through their letting agents – and almost a million deposits worth £900m have been protected. However, too many landlords are still not aware of the law or are deliberately flouting it. But that can be a costly mistake.

For example, one small landlord called me last week trying to recover unpaid rent totalling nearly £3,000. She had genuinely not known she needed to register her tenant’s deposit until I raised the issue. She was devastated when I explained that her tenant could take her to court to seek to recover three times the sum of the deposit and the return of the original deposit. This would have meant the landlord paying out in excess of £3,600 simply because she had failed to take the basic step of registering the deposit. What was owed to her in rent arrears would be set off, but she would still end up out of pocket.

And it isn’t just landlords dealing direct with tenants’ deposits that are suffering the consequences of failing to comply. Unwitting property owners are also paying the price when letting agencies fail to safeguard deposits in the required way. As a landlord you should ensure your letting agent is fully compliant with the legal requirements as it is you as landlord who is ultimately responsible for the deposit.
We are currently acting for a tenant who has a claim worth over £6,000 because her landlord and his agents failed to protect her deposit for over five months, even when she politely and repeatedly reminded them to do so . The agents only took the necessary steps after the County Court issued a default judgement. The landlord is furious with his agents, who he had entrusted to take the right action. No doubt he will now take action against his agents, but in the meantime he will shortly be ordered to make a payment of £6,000 to my client. He may also be ordered to return her deposit, and will be ordered to pay her legal costs.
Signing up to the scheme also places new legal requirements on landlords, some of which have recently been amended. The new law also gives tenants the option to challenge through Alternative Dispute Resolution for free any deductions from deposits made at the end of the tenancy. To avoid headaches, landlords can take steps to discourage tenants from frivolously challenging deductions and to prevent any genuine deductions being rejected should the case go to ADR.

Get full details about the changes to the scheme and how best to protect yourself from challenges to deposit deductions with our FREE updated Tenancy Deposit Factsheet at www.ms-solicitors.co.uk.

Next month Cate Searle will offer advice on how to ensure you don’t end up with a claim for unlawful eviction.

Moving Into Your First Apartment-Know All The Costs

When you move in to a new apartment, the landlord may charge you more than the first month’s rent. Before you sign the lease, make sure you understand exactly what you’re going to be charged, and get it in writing.

Security Deposit: This is mini-landlord insurance. The deposit is equivalent to about one to two month’s rent and can cover anything from a broken window to stained carpet. At the end of your lease, the landlord will conduct an inspection and see whether or not he or she needs to use any of the money on anything damaged beyond the normal “wear and tear” during your stay. State law may only use the security deposit for three purposes: unpaid rent, damages and for cleaning stains or any excessively dirty area. The landlord cannot use it to repaint the apartment to make it look more inviting for the next tenants. (That’s illegal).

Cleaning Fee: Since landlords cannot legally use your security deposit for basic cleaning purposes, some of them choose to include a cleaning fee in your lease.

Last Month of Rent: Some landlords ask for the last month’s rent in advance. This way, if you break your lease without first consulting your landlord, he or she has 30 days to find a new tenant before he or she needs another rent payment. If you’re a good tenant, and don’t break your lease, then you’ll save yourself the trouble of having to worry about getting together your last month of rent. (This can be really helpful when you have to deal with all the costs of moving out!) Unlike the security deposit, this charge is non-refundable.

Pet Deposit: This, too, is a form of mini-landlord insurance typically running somewhere around $300.00. The pet deposit is used to cover any wear and tear caused by your pets. Some landlords also ask for a ‘pet fee’ once a month ($20-$50) to cover the cost and inconvenience of the lovely pooper-scooping duties. Renter’s Insurance: You aren’t required to get insurance, but it is HIGHLY recommended. It’s incredibly easy for an unusual character to walk through the complex unnoticed. New people are in and out of apartments all the time, so you don’t have the same security that a homeowner does. With that in mind, you ought to invest in Renter’s Insurance as protection against theft, water damage and fire.

Parking: You might not always catch that prime parking space, and depending on where your apartment complex is, this could mean parking on the street. If you’re living in the arts district in Downtown Dallas, you might need to feed the parking meter monster or pay for a secured parking lot. Keep this in mind when you yearn for that artsy loft.

Some states put a limit on the deposits a landlord can ask for. For example, in California the deposits cannot add up to more than two-month’s rent. Check out the landlord/tenant laws to get the scoop on your state’s restrictions.

Regardless of how many of the deposits and fees the landlord asks you for, make sure these are all outlined in the lease. If they are not, make a list of all of the charges, when they were paid, then date it and have the landlord sign it with you. Keep one copy of this list and give one to your landlord to avoid any problems in the future.