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Property Hawk

REPAYING A TENANTS DEPOSIT

One year statistics for tenancy deposits
Since April 6th 2007 any landlord taking a tenancy deposit will have to use one of the government approved schemes

In just over a year since its launch the Deposit Protection Service (DPS) the custodial scheme has protected approximately 250,000 deposits worth around £185 million.  The number of landlords using the service is currently more than 84,000 and the number of agents is approximately 8500.  Since the launch of the scheme, The Deposit Protection Service (DPS) has received around 200 new registrations from landlords and agents every day.

More than £2.5 million of interest has been accrued and £200,000 paid out to either the tenant or landlord - whoever is entitled to the deposit at the end of the tenancy.



What happens at the end of the tenancy?

Many of the first tenancies are now coming to an end and landlords are being confronted with the question:

“How do landlords repay their tenant’s deposit?”

One of Property Hawk’s team has recently been confronted with exactly this situation.  We have therefore drawn on his experience of using the Deposit Protection Service (DPS) website to explore what a landlord needs to do to repay their tenant’s deposit. The following is a step by step guide to using the online system:

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Dealing with the tenants deposit

1. Firstly, a landlord when they register will select a login name and password.  They need this to access their DPS account. They then need to select the tenancy for which they want to have the deposit repaid.

2. Having selected the required tenancy and opted for repayment; the landlord then has to decide between the option of having the lead tenant present with their repayment ID and forwarding address (details as well as forwarding details and payment details for all tenants.) and the alternative scenario where these details are not available.  In the majority of cases the landlord is most likely to apply to the DPS without the tenant being present and will elect to complete the process online.
 
3. Following this the landlord is then directed to the first of the 5 repayment stages.  At this point the landlord needs to decide whether they are withholding any of the tenant’s deposit. A landlord should have decided this and discussed this with the tenant at the ‘check out’ stage. 

In coming to this decision with the tenant a landlord should take into account any ‘fair wear & tear’  that has occurred to their buy-to-let property.

4. Having decided whether you as the landlord wish to withold any of the tenant’s deposit to cover damages to their property, the Deposit Protection Service (DPS) website then requests the details of the lead tenant to be filled in.  If the tenant has moved out then this will have changed from that of your investment property. This makes obtaining the tenants forwarding address vital.  This situation actually works out well for a landlord because having an accurate forwarding address for the tenant allows the tenant to be contacted should there be any problems with the buy-to-let property which were not initially picked up by the ‘check out’.  Updating the DPS records with the tenant’s new forwarding address is made easy by the provision of an integrated address finder.  A landlord should ensure therefore that they have an accurate record of the tenant’s new postcode at the ‘check out’ stage.

5. Having entered the tenants new address details, the landlord then needs to enter their landlord repayment ID.  This is something that landlords should make a note of when they initially pay over their tenants’ deposit.  These details are e-mailed automatically through to the landlord selected e-mail address when a deposit is protected.  It’s worth landlords printing off this e-mail and saving a copy with the Inventory for their buy-to-let property to ensure that they have the details just in case they have problems with their e-mail in the intervening months between the start and the end of the tenancy.

6. Having completed these details the landlord is at the end of the process.  The DPS website responds by confirming that they will contact the lead tenant to see if they are in agreement with the landlord’s proposed action with respect to the tenant’s deposit. 

7. In the scenario tested where the tenant wasn’t present and the landlord completed the online form, then the DPS writes to the lead tenant and providing they make no objection, the tenancy deposit will be returned to each party in accordance with the landlord’s original request.

Here are some additional details in brief about the Deposit Protection Scheme.  For the full details login to the Property Manager and download a complete copy of the terms and conditions.

Interest on deposit

Interest will be paid to all parties that have elected to receive interest on the rental deposit. Where a deposit is paid to one or more of the Landlord, Tenant and Third Party they will each receive a pro rata amount of interest.  Tax will be deducted at 20% from all interest earned and interest will be credited net of such tax to the amount of the Deposit repaid.

Disputes

Where a dispute over the deposit a rises, if the Landlord & Tenant agree they can use the TDS Alternative Dispute Resolution (ADR) Service.  The use of the ADR service is free although each party must bear the costs of participating in the ADR Procedure.  The Adjudicator cannot make any award on costs. 

The good news for landlords is that one year on after the introduction of the TDS there have been only 43 cases requiring adjudication and only three have gone to the County Court, whilst The DPS' impartial adjudication service has dealt and with the rest.

Alternatives

The DPS is the most popular of the Tenancy Deposit Schemes.  Landlords should remember that there are alternatives.  For instance it is possible to use one of the insurance backed schemes .  It is also possible to avoid the tenancy deposit scheme completely by not taking a deposit and instead opting for an insurance policy to cover any potential damage to a landlords buy-to-let investment property.


Have you any experience of using the Deposit Protection Service?   

COMMENTS-

I have a rogue tenant who is 4 months behind in the rent - we are in court tomorrow seeking eviction. The tenant won't give their authority to repay the deposit, even though it means we have defaulted on the mortgage payments. The TDS will not repay the deposit without the tenant's authority.
 
For a single claim, you can only claim it after the tenancy has ended, and you have to swear an oath in front of a solicitor or magistrate. Yet more cost.  We've already lost £3,000 which we are unlikely to recover.
 
THe TDS don't actually read the email or question you send, they just send back a standard response, and it's not helpful.
 
As for being a landlord, this experience shows me that the rights have swung too far in the way of the tenant and I'm being treated very badly indeed by all the agencies which keep informing her of her rights, but not her obligations.
 
I will see what the court says tomorrow, but I have asked for voluntary repossession. The women is a parasite, and she's driving me over the edge.
 
Kind regards
 
Frances Lewis

We took a holding deposit on 1 of our flats of £200 out of £525 rent which then would have formed part of their full £525 deposit. About 2 weeks after and about 2 weeks before the tenants were due to move in, one of them sent me a text saying that they would not now move in as they had split up. By this time I had already lodged this part of their deposit with the DPS and faced having to find a new tenant to move in for 2 weeks time so as to avoid a void period - GREAT. I spoke to the girl - she said yes she understood that they would lose their holding deposit - had even discussed it as part of their break up!! He however was the lead tenant.
 
I contacted the DPS that day - requested full repayment to myself - nothing happened - the lead tenant didn't reply. Eventually I rang the DPS and they sent me a single claim form, which I had to get a solicitor to witness my signature and then send in - if the tenants don't reply to the DPS' letter within 14 days then the money comes back to me. We took the holding deposit mid June - I've just got the deposit back - 13th August - so a full 2 months after.
 
Now I know that £200 doesn't sound a lot, plus we were lucky and a tenant wanted to move in on the very same day the others were due to move in, but putting a holding deposit in - which as far as I am aware is part of the requirement is a tricky one and landlords may face being out of pocket for a fair while, through tenants not moving in and having to find new ones and from waiting for a DPS response. Fortunately my receipt for the holding deposit states that if they decide to not take up the tenancy it is not refundable, but waiting 2 months to get it back from the DPS and having to go through all that rigmarole was not good.
Anyway, just thought I would share.
Love the website by the way Thanks Jo

I manage my own properties and I have found that using DPS has been both simple and reliable.      Returning deposits to international tenants that are returning to their homeland does involve a fee for international money transfer which is tiresome but with UK tenants the DPS arrangement works perfectly.
 
TJ, Nottingham 



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