Tenant Deposit Schemes - What are alternatives?

infocom

Hi

I have only 7 tenants in 2 houses, and don't make any profit (it all goes after maintenance and repairs especially after morgage increases now). But now by law I have to pay some other companies some money for nothing. I don't withhold deposists yet I am being penalised. The Dispute Service just quoted me £665 + VAT for all tenants (I am not VAT regsitered, dont you hate when people quote you +VAT - that's £781.38!). Its £95 per tenant. Considering some tenants come and go every 6 months, thats very expensive. In theory on a 6 month contract I could be paying £1562.76 per year on tenant bond "insurance" with this company. Why would anyone go for the insurance schemes over the free custodial (where they just keep interest which equates to ~£85pa on a 5% account)?!!!???!!

So as this is just another way for people to make money from people trying to make money, are there any alternatives? I have thought about:-

1. Clause in contract saying deposit is £x minus £95 admin fee, so client pays for it?

2. No deposit and find good tenants? I have never had any tenant damage anything so have never had to take any money off deposits so at least this way it doesn't cost me anything - in fact if they did damage it would cost less to repair than the cost of the schemes!

P.S. My tenants dont want me to join because neither them or I get anything from this and would result in more hassle and more costs for them.

Thanks

Guy_Montag

http://www.depositprotection.com/

It's free!

infocom

Ah yes this is the custodial scheme. I will most likely go with this, but they keep the interest. So looks like the cheapest one. I wonder why people would go with any other.

But the principle still exists! Why should these companies make money from us! I and my tenants dont need them. I've kept less money from deposits (£0) than the interest this scheme will make for the company, so maybe I should just not take deposits as why should they make money on them when I don't (edit: actually I would make the interest if I did keep the deposit, which is more fair than them taking it! So we'll all lose. )

Guy_Montag

infocom wrote: »

Ah yes this is the custodial scheme. I will most likely go with this, but they keep the interest. So looks like the cheapest one. I wonder why people would go with any other.

But the principle still exists! Why should these companies make money from us! I and my tenants dont need them. I've kept less money from deposits (£0) than the interest this scheme will make for the company, so maybe I should just not take deposits as why should they make money on them when I don't (edit: actually I would make the interest if I did keep the deposit, which is more fair than them taking it! So we'll all lose. )

Search this board for people asking for help after being ripped off by their former landlords - there are dozens of cases. In my own case, I've never had any money withheld, but the boggers try their best to hold onto it for as long as possible - presumably hoping I'll give up. So why is it being done? Because, while you are a good landlord, there are plenty that are not.

thelawnet

infocom wrote: »

Ah yes this is the custodial scheme. I will most likely go with this, but they keep the interest. So looks like the cheapest one. I wonder why people would go with any other.

But the principle still exists! Why should these companies make money from us! I and my tenants dont need them. I've kept less money from deposits (£0) than the interest this scheme will make for the company, so maybe I should just not take deposits as why should they make money on them when I don't (edit: actually I would make the interest if I did keep the deposit, which is more fair than them taking it! So we'll all lose. )

Do you think they should provide their service for free and give you the interest? How will they pay the bills????

Why don't you rent your properties out for £0/month as well?

Generali

OP - you're paying for the egregious practices of others in your industry. It's unfortunate but it's a part of business, sadly.

scrummy_mummy_2

infocom wrote: »

Ah yes this is the custodial scheme. I will most likely go with this, but they keep the interest. So looks like the cheapest one. I wonder why people would go with any other.

It allows me to control when the client gets their deposit back to a degree, within the rules of the scheme obviously.....if they need their deposit I hold to buy a new home (as my last set of clients have just done) I have the OPTION of giving it back to them when WE (me and the client) see fit, not having someone else control it.
Basically, it's about control for me and flexibility for my clients....I suppose if you have a lot of properties you could use the interest you can earn to fund the costs but I don't know for sure, I've only got 3 properties.

infocom

but the boggers try their best to hold onto it for as long as possible

Most aren't like that. I think tenants should do what my tenants did and make sure to pick a good landlord. They have a choice where to live too. My tenants said they like me in addition to the house and thats an important factor.

Do you think they should provide their service for free and give you the interest? How will they pay the bills????

The point is I dont need or want their service. Why should I pay for something I dont need or want and am forced into using. It makes no sense for me to do this as its free money for other people.

Why don't you rent your properties out for £0/month as well?

Well thats just silly isn't it.

infocom

I suppose if you have a lot of properties you could use the interest you can earn to fund the costs but I don't know for sure, I've only got 3 properties.

The costs were per tenant, so if you have seperate contracts the £95 per bond is way higher than the interest it would earn, so I dont think the interest would ever pay for the cost, unless the tenant stays at the property for a number of years. But on a 6 month contract the interest wont be anywhere near the cost of the scheme.

So I think the only feasible, law abiding option, is the custodial scheme at http://www.depositprotection.com/. Bet they're over the moon getting government initiated free money from the interest on the £millions they've collected. I wont be losing much, I think about £85 per year so its not about the money. Its about the principle.

sooz

I think the problem you might find with using the custodial scheme is the length of time they will take to return the deposit to your tenants.

At the lower end of the market, I would think that tenants want their deposits back asap to pay a deposit on a new place.

They would have to wait 10 working days for money to be paid back by the DPS, then adding bank clearing days onto this........it is a long time!

The RLA suggests not taking deposits if they are under £600. Look here for more information
http://www.rla.org.uk/landlord/tenancy_deposits/tds-Alternatives.shtml

Generali

but the boggers try their best to hold onto it for as long as possible

infocom wrote: »

Most aren't like that. I think tenants should do what my tenants did and make sure to pick a good landlord. They have a choice where to live too. My tenants said they like me in addition to the house and thats an important factor.

In my experience, almost all LLs will try to withold your deposit at the end of the time. They're lovely until they've got your money in their pocket.

infocom wrote: »

The point is I dont need or want their service. Why should I pay for something I dont need or want and am forced into using. It makes no sense for me to do this as its free money for other people.

You do need their service, you need it to stay within the law. You may not want 3rd party insurance for your car. After all, you don't go around running people down. However, you need it because the law tells you you need it. It's the same with your gas safety cert., employers' liability insurance if you're an employer... There are all sorts of things that somone in business is compelled to buy. It's a cost of doing business and if your business can't support that cost then it's not a viable business.

That the business isn't viable because of regulatory conditions, economic conditions or anything else is neither here nor there.

Why don't you rent your properties out for £0/month as well?

infocom wrote: »

Well thats just silly isn't it.

It is very silly although probably no sillier than you expecting a business service for nothing!