Thursday, 20 March 2014

Deposit bonus for savvy tenants

Buy-to-let landlords have been warned that savvy tenants could be exploiting the rules to their own advantage when it comes to their deposit.

Andrew Oranjuik, from our litigation team, said most residential landlords were aware that if they received a deposit from a shorthold tenant, it must paid into a formal tenancy deposit scheme.

“The rules were introduced to stop landlords withholding the deposit at the end of a tenancy, often for the flimsiest of reasons. I believe it’s a good thing to have the rules in place to protect tenants, but landlords must be aware of the consequences they will face if they don’t follow the guidelines correctly.”

Andrew said that within 30 days of receiving the deposit, a landlord must pay it into an approved scheme and inform the tenant of their actions.

“If you don’t take this step, the tenant can take their case to court and the court will have no other option than to rule against the landlord, ordering you to pay the tenant between one and three times the value of the original deposit.This rule applies even if you have already returned the deposit to the tenant in full at the end of their tenancy.

“Such a move can bring a real windfall for your tenant, and we have seen a noticeable increase in tenants becoming more and more savvy and willing to cash in on their landlords’ failure to comply with the strict guidance.

“And not only could you find yourself facing a payout that seems unfair, failing to deal with your tenant’s deposit correctly could cause difficulties when you try to take the property back. With a rise in the number of people taking advantage of favourable price rates to acquire buy-to-let properties, issues like this can have a real impact on many people.

“You need to make sure every detail is correct before you let the property out, as it can be very expensive if anything is left undone.”