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Hello,
I was wondering what thoughts everyone has had with regards to the Rent Deposit Scheme, another great idea from the Labour Party.
Does anyone have any ideas on how to get around this, as from October 2006, the deposit money will be looked after by a Government appointment. Also what does this mean for a small or big landlord, how will it effect there cashflow. I feel that this would penalise many landlords. It will most certainly effect me.
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jasprit,
unfortunately i don't know much about this so if anyone can shed any light i would also be grateful.
tom |
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Tom, Jasprit.
I have looked into this in detail, it will affect everyone who takes deposits from October 2006.
Basically you have two choices,use a Custodial scheme or an insurance backed scheme.
With the custodial scheme you must deposit bond within 14 days of receiving itand notify tenant it is done.At the end of tenancy assuming both parties agree bond will be refunded to tenant or split if agreed otherwise.If no agreement is made no payment will be made to either party, until agreement has been made or court decide. This scheme is likely to be free as they expect any charges to be funded from interest on money held. Any interest over and above a rate specified by government wil be paid back with bond.
With the insurance scheme you can hold deposit but you must notify tenant of which deposit scheme you belong to. If there is a dispute at end of tenancy you must pay all of money to the insurance sceme within 10 days , it again remains held until dispute resolved or a court decides.
If you fail to join either scheme then there is penalties, one being you cannot use accelerated possession procedure.
We have decided not to use either scheme, instead we are going to stop taking bonds, instead we are charging a non refundable admin fee of £200, and insisting on a guarantor, no guarantor, no tenancy.
Hope this helps
Andy |
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Hi Andy,
When you say you are not taking bonds, is that for your own properties or are you talking as a letting agent?
Do you have any tips for somebody who is wanting to become a letting agent? Any would be great!
Cheers
Simon
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Simon,
It is for our own properties, our main reason for doing this is to avoid any voids at the end of a tenancy.
As an example,if tenant does a flit, you will need to go through the court to formally end the tenancy and reclaim the bond, even on accelerated grounds this will take a few months, you will not be able to re let the property in the meantime even though you know it is empty, AND LOSING YOU MONEY.
I undestand why the government is introducing this law, however I think is is badly thought out by people who have no understanding of the private rental market.
My tip for anyone wanting to become a letting agent, do it for yourself, not for others, concentrate your efforts on building your own portfolio, and manage them yourself, your income will be far greater in the long term.
Andy |
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Everyone, Thanks for all the contribution as this is great. Andy your point is interesting,if the tenant does a bunk one will have to go to court to end the tenancy agreement and get the money's owed, why cannot one let the property in the mean time. Also can we not change the AST agreement to say the the if rent is not paid after a certain time period then the agreement is voided and the bond will cover the rent, so as to protect the landlord from loosing money. I do not know much about the law but providing a product or service without paying is this not classed as theft!!!!
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Jasprit
You could not re-let the property before a court order as the previous tenant even though they may have disappearded have a legal right to re occupy the property if the tenancy has not formally been ended, that can only be done by the tenant giving you written notice or a court order.
In practice as it stands now if a tenant does a flit you know they will not be back when they owe money, so you just re-let.
Under the new deposit scheme either system will need proof that the new tenacy has ended legally, they will not accept a new deposit(tenancy) on a house which has not formally had its old tenancy terminated.
Your current AST should already say that if rent is unpaid this will result in termination of tenancy, and on termination bond can be used to cover any arrears, however unless tenant agrees to vacate you still must use the courts.
Andy |
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andy,
thanks for all that info. really helpful.
thanks,
tom |
