Guide to Deposits

How much is an appropriate amount for a deposit? My tenant has obviously damaged my property: can I keep the deposit? The shower and kitchen in my buy to let property were filthy after the tenant left, can money from the depoAsit cover cleaning? Deposits are often the source of confusion and disagreement between landlords and tenants. Handling the deposit professionally and smoothly indicates that you are a competent landlord. This ibuytolet guide to deposits provides you with all the information you need in order to operate successfully.

Introduction to deposits

As a buy to let landlord taking on new tenants, you will ask them to provide a deposit. This ensures that if any damage is done to the property, or the bills and rent fall into arrears, the landlord can use this money to cover the costs. However, deposits are a complex part of the buy to let procedure.

How much should the deposit be? 

The deposit amount is generally set as one month’s rent, although some private landlords do ask for more. There is no accepted upper limit for a deposit, but generally a month’s rent is standard. If damage is done to the property, or the tenant does not pay the rent, the deposit may be used by the landlord. The deposit does, however, belong to the tenant until such time as he or she moves out (unless the landlord shows that a financial loss has occurred).

It is within the rights of the tenant to ask for receipts or estimates of any items deducted from the deposit, and normal wear and tear cannot be included in money deducted from the deposit.

What happens to the deposit?

When the tenant pays the deposit, the landlord or agent holds onto it until such time as the tenant leaves. In theory, the deposit will then be returned to the tenant when they come to leave the property. As the landlord, it is your responsibility to return the money to the tenant less any deductions.

The landlord may only keep back part of the deposit if damage has been caused to the property or the rent has not been paid. For both tenant and landlord an inventory (a detailed list of contents and condition of the property) of the property is a good idea. For tenants, if any damage occurs the landlord should be notified and the damage repaired if possible. When moving into a property, the tenant should take note of any signs of poor condition and report them to the landlord before signing an inventory. It is within the rights of the tenant to perform their own inventory, and sign it in the presence of a witness.

When will a deposit be kept back?

The landlord is obliged to make reasonable deductions for any unpaid rent, missing items, cleaning or damage to the property. Anything beyond this is not legal, and landlords can only claim for financial losses. When it comes to cleaning, the tenants are only obliged to clean items soiled beyond normal wear and tear, and the landlord may only keep money from the deposit in this instance. When it comes to damages, the landlord may only deduct what is needed to repair and replace the item/s on a ‘like for like’ basis. Unfortunately, wear and tear is not a fixed term. The amount that can be expected depends on the type of property, and the length of the tenancy. Any potential problems between landlord and tenant should be discussed between both parties as early as possible.

Rental arrears may be deducted from the deposit, and if the tenant owes more than the value of the deposit the landlord can take them to court.

When is the deposit given back?

The tenancy agreement should say when the deposit is returned, and it should generally be shortly after the end of the tenancy. Some landlords will withhold money until they are sure all bills have been paid. A joint inspection should be carried out between landlords (or agents) and tenants. At this time, having an inventory will help to settle any disputes, particularly if it details condition.

What problems can arise with deposits?

The landlord should take the tenant through the reasons for withholding all or part of the deposit. Problems can arise through disagreements between landlord and tenant. Being taken to court by a tenant over a few hundred pounds means that most landlords are scrupulous with the deposit system.