When the tenant signs their tenancy agreement it is standard practice for them to pay a security deposit. A security deposit is a one off payment which is usually (but not always) equivalent to one month’s rent. The security deposit is kept by the landlord until the tenancy agreement ends. When the tenant moves out, the landlord will inspect the property for damage and deduct any monies from the deposit to cover the cost of any damage. If the tenant has met the terms of their tenancy agreement (i.e. paid all rents and bills etc) and where there is no damage to the property then the security deposit will be returned to the tenant in full.
In 2007 the government introduced the Tenancy Deposit Scheme. This scheme requires landlords who are renting out their property on an assured shorthold tenancy, to place the security deposit into a government backed scheme. These deposit schemes protect the deposit throughout the duration of the tenancy agreement. At the end of the tenancy agreement the landlord must withdraw the money from the deposit scheme and pay it back to the tenant minus any deductions required.
The landlord must place the deposit in one of the following government backed schemes:
- Deposit Protection Service (Custodial and Insured)
- Tenancy Deposit Scheme
- Capita Tenancy Deposit Protection
The landlord (or letting agent) must put the deposit into a scheme within 30 days of receiving it.
The following information must be given to the tenant within thirty days of receiving their deposit.
- The full name and addresses of both parties i.e. the landlord and the tenant(s).
- The address of the rental property.
- The date from which the tenancy agreement starts and ends.
- The amount of rent to be paid and the date and frequency (i.e. weekly or monthly).
- Details of any deposit that must be paid and conditions under which the deposit will be kept or returned.
- Details of how the deposit is protected and the name and contact details of the tenancy deposit scheme and its dispute resolution service.
- How to apply to get the deposit back.
- The name, account number and sort code of the account where rent should be paid into (if paying by direct debit).
- The notice period both the tenant and the landlord must give should either party wish to terminate the tenancy agreement early.
- The responsibility of each party towards the property e.g. who is responsible for minor repairs.
- Details as to whether the tenant is allowed to sublet or open the property to lodgers.
- Rules on whether pets and smoking are permitted.
Deductions may be made where the tenant has failed to uphold their responsibilities as laid out in their tenancy agreement. Here are a few examples of reasons why a landlord may deduct money from the security deposit:
- Cleaning deductions
If the tenancy agreement stipulates the property must be cleaned before the tenant moves out, a deduction for cleaning the property may be made if the tenant fails to do this.
- Damaged property
If the property or its contents are damaged, then the tenant is responsible for repairing or replacing the item. The tenant must replace like for like so it is not always necessary to buy a brand new item, a second hand one may be adequate. Items which break as a result of normal wear and tear do not have to be replaced by the tenant but the landlord should be notified as soon as possible. Where the tenant does not replace an item the landlord may deduct a sum of money from the security deposit equal to the cost of purchasing a replacement. The tenant is within their rights to ask for receipts or estimates for any items which have been deducted from their deposit.
- Outstanding and unpaid rent
If a tenant leaves a rented property owing rent to the landlord, any unpaid monies will be deducted from the security deposit. If the amount owed exceeds the amount held by the security deposit, the landlord may begin court proceedings to reclaim the owed monies.
- Missing items
If the landlord has reason to believe that an item has gone missing they can deduct money from the deposit to replace it. The amount deducted should be for a similar like for like item.