Can a Landlord Hold a Tenant's Deposit?

There has been many different theories on this topic and I would like to clarify what landlords are legally allowed to do with a tenants deposit.

Okay so you have had a tenant move into your property and you have taken a bond/deposit in case they damage the property or cause you to have other costs (Non payment of rent etc.)

Previously landlords could hold the deposit themselves and take money should the tenant give them reason to do so. However a few rogue landlords took advantage of this and would keep the tenants deposit without reason, this instigated the government to introduce the tenancy deposit protection scheme.

The idea behind this scheme is that the money taken from the tenant as a deposit would be taken by the landlord or agent and sent to the government custodial scheme. This basically meant that the deposit was no longer in the landlords hands. Any disputes with owed money to the landlord would have to be taken up with the custodial deposit scheme.

Okay so this sounds fair but from a landlords perspective, this has its drawbacks! If there is money owed, the dispute can take a long time and may result in you battling to get what is fairly owed to you.

The scheme is very much in favour of the tenant and should a tenant go missing with owed money, a landlord has a hard time convincing the custodial scheme that you no longer have any contact with the tenant.

The reason for this is that the government scheme needs the tenant to confirm release of the held monies to the landlord.

So you ask...............can I get around this........the answer is YES!

You MUST under all cases have the deposit registered in the government scheme but you don't necessarily have to send the money for custodial holding.

A company called mydeposits allows you to hold the money yourself but will INSURE IT under the government scheme. This means that they will provide you and your tenant with a certificate. Should there be a dispute they will act as the intermediary.

There is a fee for this service but it is not much, and in my opinion is the preferred option for many landlords.

Letting agents who manage or let your property may try and take your deposit into the custodial scheme. You are able to request that you will hold and insure the deposit for them under your own insured scheme.

Hope this is of some help! Happy Letting

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