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Transferring Deposits Between Landlords

It can be easy understandable for a tenant to begin to question the security of their home if their landlord has decided to sell their rental property. Such a transitional period can curate uncertainty in regards to which landlord now hold responsibility over the property, its tenants and of course, the tenancy deposit.  It’s certainly no secret that for some tenants the multiple payments needed to be made at the outset of the tenancy to secure the rental property can create an insurmountable financial barrier. With this in mind it is in the best interest of both landlords and tenants to ensure that the tenancy deposit is secured.

Naturally, this situation can leave many tenants wondering what happens to my tenant deposit when my landlord changes? Who should return the tenancy deposit at the close of the rental period; and perhaps the question on every renter’s lips, how do I get my tenancy deposit back?

What Happens if the Property Is Sold Mid Tenancy?

If the landlord chooses to sell their rental property with occupants that still have an active tenancy period, the residents are referred to as “tenants in situ”.  In such an instance the responsibility of securing the tenancy deposit does not lie with the tenants, but rather both the original and new landlord.  

Whilst the specifics will vary slightly depending on the provider of the protection scheme, generally speaking is the landlord has chosen to place the funds into an insurance based scheme it will be the responsibility of the original landlord to provide the new landlord with the funds taken from the tenant. At this point the new landlord will be subject to the obligation to ensure the deposit is still entered into an appropriate scheme. It is important to note that typically the registration made by the original landlord cannot be transferred to the new owner of the rental property, therefore it is essential to make the security of the tenant’s deposit a key aspect of the negotiations.

If however, the landlord has chosen to enter the tenancy deposit into a custodial based scheme and sell the property, the process is arguably far smoother. As the original landlord will not in physical possession of the taken funds in the instance they have used an insurance based scheme, in most cases the information of the new owner of the rental property can simply be updated and used instead of the original registrar, i.e. the old landlord.

Regardless of the type of protection scheme the property owner submitted the requested amounts into, the landlord is still obliged to provide the tenants with information regarding the details of how their deposit is being protected within 30 days of the new landlord taking possession. Naturally, some landlords will be wary of any repercussions if any mistakes are found with the process at the close of the rental period. With this in mind it is strongly advised that when the possession of the rental property is being transferred the original landlord obtains written confirmation of the scheme in which the new landlord intends to enter the deposit, alongside exclusively releasing the appropriate amounts to the scheme directly if on a custodial protection plan, and only releasing the funds in an insurance based plan, once the new landlord has confirmed the funds are re-protected.

What Is the Purpose of a Tenancy Deposit?

A tenancy deposit is intended as both a deterrent and a safeguarding measure, and whilst landlords are under no legal obligation to request their future tenants make such a payment, to say it is common practice would be an understatement.

This sum is taken from the tenant as they are moving into the rental property and is given to the landlord. Sometimes referred to as a security deposit, this amount can be used by the landlord to offset any costs they incur because of the tenant’s actions. Because of this many landlords consider the tenancy deposit to be an effective incentive for the occupants of their rental property to respect the condition of the accommodation,  as otherwise they would risk not having the full amount taken retuned.

Like the holding deposit there are conditions under which the tenant will see the full amount requested for the tenancy deposit returned; primarily if the landlord finds no faults with the property upon its final inspection. When this takes place both the landlord and tenant will assess the condition of the rental and its contents, referring to the property inventors curated at the start of the tenancy period. With this in mind the landlord is not able to make claims for any damages that they find, with anything considered to be attributed to “fair wear and tear” not being valid for deduction from the deposit amount. This is because as can be expended over the course of many tenancy periods certain areas of the property and its furnishings will begin to exhibit the tell-tale signs of high use. With this in mind the landlord is not able to make the tenant pay for slight blemishes, scuff marks or the exacerbation of existing problems, providing that they have been properly reported to the landlord. Whilst there is an absence of a legal definition of what comprises “fair wear and tear”, it is widely accepted to be the gradual decline in condition of the property and its contents, with the major caveat that any damage has not been maliciously conducted by the tenants of the rental property and they have made the landlord aware of all necessary remedial work as per the tenancy agreement.

However the application of the tenancy deposit is not exclusive to remedial work that needs to be carried out. Alongside these repairs the landlord is also able to deduct any overdue or missing rental payments from the tenancy deposit. With this being said, there are far more effective ways to help tackle rental arrears and any landlord pinning their hopes of avoiding missing income solely on the tenancy deposit will have to wait until the close of the tenancy period to see any resolve; not to mention that rental arrears can rather quickly exceed the amount taken for the deposit.  Providing they are clearly outlined in the original tenancy agreement, signed by both parties concerned, the landlord is also able to deduct the costs of cleaning the rental on the close of the tenancy period, although it is worth noting that this is more commonly seen with landlords that rent to full time students, or pet owners.

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How Much Is a Tenancy Deposit?

Being applied to all assured shorthold tenancies, student accommodation and private lets within the UK, the Tenant Fees Act 2019 moved to make the rental landscape more accessible for prospective tenants, effectively limiting the amount they can be charged before moving into a property. Essentially the Tenant Fees Act places a cap on the amount a landlord can request for a holding deposit and a tenancy deposit, making it easier for tenants to find a new home, whilst avoiding exorbitant pay walls.  The act means that if the rental property charges up to £50,000 each year in rent, the landlord is able to request a maximum charge equivalent to five weeks rent for the tenancy deposit. If however, the annual rental charge for the property is more than £50,000 then the maximum amount the landlord is able to request from their tenants is raised to the equivalent cost of six weeks rent; however it is important to keep in mind that high upfront costs may deter many potential tenants from your rental.

Do Landlords Have to Put My Tenancy Deposit in a Scheme?

Whilst the landlord of the rental property is under no legal obligation to take a tenancy deposit from any of their tenants, if they choose to do so then they must enter the appropriate sum into a government approved tenancy deposit scheme. The landlord must ensure that the full amount of the tenancy deposit is protected within 14 days of taking the sum, with another 28 days following this in which to notify the tenants of the protection. When doing so the landlord must detail the name of the scheme in which the deposit is being protected, appropriate contact details for the scheme, alongside confirming the address of the rental property and their own address and contact details.

When entering the tenancy deposit into a government approved protection scheme the rental property owner will have two options on how to execute this, placing the sum into one of two different types of schemes. Known as custodial protection schemes and insurance based schemes, the significant difference between the two that is important for landlords to note is who physically retains the requested amount throughout the duration of the tenancy period.

If the landlord chooses to protect the tenancy deposit through an insurance based scheme, then they will be personally responsible for the tenancy deposit and will physically safeguard this amount during the rental period. Whilst this could raise some concerns with tenants about the landlord having access to these funds, the rental owner is prohibited from using the tenancy deposit to fund any remedial work or replace furnishings  without first raising this with the tenant, and if necessary following the dispute resolution procedure. However, if any of the damages a landlord is wishing to expend through the tenancy deposit is disputed by the tenant, the landlord is required to hand over the full amount taken to the deposit protection scheme until a time where an agreement has been made regarding the deductions.  

On the other hand, if the owner of the rental property decides to register the tenancy deposit with a custodial based scheme they will not be required to safeguard the amount taken, instead this will be handed over to the schemes provider. At the point where the rental period expires, the deposit protection scheme will issue the taken sums to the appropriate parties, with any deductions being paid directly to the landlord. If both parties concerned in the tenancy agreement are unable to reach an agreement in the amount that should be deducted for any damages, one of the greatest benefits of the deposit protection schemes is the ability to take advantage of their dispute resolution service. This service provides an impartial party during the dispute and if an agreement cannot be reached, they will have an overruling verdict on how the tenancy deposit should be distributed. If however, no damage to the rental property is found and no disputes are being raised the landlord must return the tenancy deposit in full to the resident within 10 days.

If the landlord fails to enter the tenants deposit into a government approved scheme within the allotted time frame, or neglects to do so entirely they can face severe penalties. If this is found to be the case the owner of the rental property can be ordered by the courts to not only repay occupants any amounts taken for the tenancy deposit, but up to three times this amounts within 14 days of the court order being issued.

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