Tenant Deposit Schemes - What are alternatives?

lic

TDS is free at the moment, but when we are all signed up to it, I suspect it will no longer be free!
At the end of a lease, I suspect that the TDS will charge a release fee, or maybe forward the deposit to the LL in the LL's name, for him to bank, and when the cheque clears, the LL writes another cheque to the tennant.
It always annoys me when a utility comany takes money by DD, but when they refund money it is normally via the cheque clearing system, so they keep hold of your money for longer.
In the case of TDS, the tenant will vacate the property, the LL/LA will inspect the property. Only after inspection can a decision be made regarding the return of all or some of the deposit. Presumably the TDS will require written documentation to release the deposit. This will take time, post the release document to their admin department, who will vet it and send it to the refunds deartment, who will eventually send a cheque to the LL?LA, who then will forward to the quite rightly infurriated tennant. How much longer will it take for the tenant to get his deosit if there is a dispute?
This scheme may well effectively trap the less well off tennant into residing longer in a property because he does not have enough money to pay the deposit on his next lease. £450 may not be a lot of money, but i'd hate to have to find it in a hurry.
How many LL's pay stamp duty on a new lease?
Under this scheme the tax office will know when a new lease is signed and expect the stamp duty to be paid.

Meatballs

lic wrote: »

TDS is free at the moment, but when we are all signed up to it, I suspect it will no longer be free!
At the end of a lease, I suspect that the TDS will charge a release fee, or maybe forward the deposit to the LL in the LL's name, for him to bank, and when the cheque clears, the LL writes another cheque to the tennant.

I don't think you have read the publically available literature on the topic.

In the case of TDS, the tenant will vacate the property, the LL/LA will inspect the property. Only after inspection can a decision be made regarding the return of all or some of the deposit. Presumably the TDS will require written documentation to release the deposit. This will take time, post the release document to their admin department, who will vet it and send it to the refunds deartment, who will eventually send a cheque to the LL?LA, who then will forward to the quite rightly infurriated tennant.

If the tenant & LL agree the deposit should be returned within 10 days. Currently it can take a month for Letting Agents/Landlords to come back to the tenant with an initial list of deductions (especially in Student Lettings!).

How much longer will it take for the tenant to get his deosit if there is a dispute?

Currently tenants have to go through the small claims court if they wish to get their deposit returned after an unsolvable dispute. This takes a long time. There are no time limits that the landlord currently has to adhere to. Basically it can't be any longer than it already could be!

This scheme may well effectively trap the less well off tennant into residing longer in a property because he does not have enough money to pay the deposit on his next lease. £450 may not be a lot of money, but i'd hate to have to find it in a hurry.

The tenants dont have access to that £450 anyway if the landlord has taken it as a deposit?!

littlesaint

Sorry - meant damages not wear and tear (having said that plenty of my landlords have taken money off my deposit for things that should be fair wear and tear!).

liz545

LittleSaint - the rent is supposed to cover the cost of wear and tear anyway (that's why there's a tax deductable element to it). If you're paying a premium to insure you against breakages, what if you don't break anything? Over the course of a tenancy you've paid a premium for nothing, and it's not refundable, unlike a deposit. As a tenant, I'm very happy with the prospect of the new scheme, although it won't affect me unless I leave my current home and take out a new tenancy; but the security and protection it offers has to be a good thing.

pcwilkins

infocom wrote: »

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).

Of course you make a profit. You wouldn't do it if you didn't!! What you mean is that the rent you get paid goes into paying off the mortgage. The profit is in the fact that your tenants are effectively paying for your house. What you mean is that the profit you make only just pays the mortgage payments, I expect.

But now by law I have to pay some other companies some money for nothing.

You're paying them for providing a service, not doing nothing.

I don't withhold deposists yet I am being penalised.

You don't withhold deposits, but the fact is that many landlords do. TDS is a new scheme designed to protect tenants from these bad landlords. The problem is that no landlord will admit to being bad, so the law has to cover you all I'm afraid.

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)?!!!???!!

It's just another expense. If it ends up meaning that you don't make a profit, you need to get into another business. It's a fact of life that new legislation often forces people to change businesses. If you're not making enough profit to cover these charges, then I would suggest you're in the wrong business anyway.

In any case £95 per tenant isn't so bad --- just add £16 per month to the rent (for a 6 month contract) and your costs are covered already.

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?

Yes, the traditional landlord option --- pass on all costs to the tenant! In this case I don't think it would be legal --- you cannot deduct money from a tenant's deposit to pay your costs. It's their money, not yours, remember? The only way to get them to pay for it would be to charge a separate admin fee, not connected to the deposit.

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!

Good idea, and your tenants will like it too. Only problem is that it means you have to trust them. Then again, under the previous rules they had to hand over a large lump sum which they might never get back --- so they had to trust you. Now the boot is on the other foot!

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.

In that case your tenants are very shortsighted or very naive. Under the old system, control of their money is in your hands. If you decide to deduct £400 because you say they damaged the bath, they cannot dispute it without going to court, which for many people isn't worth the hassle. Some landlords deduct from the deposit as a matter of course because they know that the tenant will do nothing about it. Who would go to court over £50?

The new systems is a huge improvement for tenants. Sure, the costs are bound to be passed on, but at least the money is locked away and and disputes are (in theory at least) handled by an independent organisation.

Perhaps the system is unfair on good landlords, but then life is unfair. Sorry!

Peter

MattOsprey

Why do so many people think that all LL's are money making thieves.
I have let my property in Cardiff today, for £1100 per month. My INTEREST ONLY mortgage is £1170 and I have to pay maintenance charge of £160 pm, plus 3 weeks rent plus vat to the LA.

So on an average month I am down £230 plus £1000 to the LA for finding a tennant. If a tennant stays 10 months that puts me at a loss of £3300 for the 10 months.

My last tannant did his hand over, and I gave him a cheque there and then for his deposit and rent he was owed.

So NO I am not making any money as the above poster assumes. I have taken a huge risk and huge investment, as I was medically discharged from the Army.

I am doing this hoping that over the long term the value will increase and pay me a pension, that I can not guarantee from the state.

olly300

MattOsprey wrote: »

Why do so many people think that all LL's are money making thieves.

Because when you have rented for a long time like I did and 50% of the private landlords you rented from took or tried to take your deposit but the 3 institutions/large businesses you rented from returned your deposit in full then the only conclusion you can make is that a high proportion of private landlords' and their agents regard the deposit as their money to keep and that is theft.

MattOsprey wrote: »

I have let my property in Cardiff today, for £1100 per month. My INTEREST ONLY mortgage is £1170 and I have to pay maintenance charge of £160 pm, plus 3 weeks rent plus vat to the LA.

Then that can be regarded by some as a poor business decision which is your decision to make.

MattOsprey wrote: »

My last tannant did his hand over, and I gave him a cheque there and then for his deposit and rent he was owed.

However making that decision as you highlighted doesn't mean you have to steal the tenant's money.

sooz

lic wrote: »

TDS is free at the moment, but when we are all signed up to it, I suspect it will no longer be free!
At the end of a lease, I suspect that the TDS will charge a release fee, or maybe forward the deposit to the LL in the LL's name, for him to bank, and when the cheque clears, the LL writes another cheque to the tennant.
It always annoys me when a utility comany takes money by DD, but when they refund money it is normally via the cheque clearing system, so they keep hold of your money for longer.
In the case of TDS, the tenant will vacate the property, the LL/LA will inspect the property. Only after inspection can a decision be made regarding the return of all or some of the deposit. Presumably the TDS will require written documentation to release the deposit. This will take time, post the release document to their admin department, who will vet it and send it to the refunds deartment, who will eventually send a cheque to the LL?LA, who then will forward to the quite rightly infurriated tennant. How much longer will it take for the tenant to get his deosit if there is a dispute?
This scheme may well effectively trap the less well off tennant into residing longer in a property because he does not have enough money to pay the deposit on his next lease. £450 may not be a lot of money, but i'd hate to have to find it in a hurry.
How many LL's pay stamp duty on a new lease?
Under this scheme the tax office will know when a new lease is signed and expect the stamp duty to be paid.

Where have you got this information from?

It is quite wrong.

When LL and tenant sign up to the TDS, and a deposit is lodged with them, both are given a deposit ref number, and both are given individual PINs to keep safe and private.

At the end of the tenancy, an outgoing inventory is perfomed.

LL and tenant agree on return of deposit, and if any monies should need to be taken off, they agree this too. If this cannot be agreed, it goes to arbitration.

Assuming it can be agreed, both parties send the TDS their PINs, and both agree on amount to be returned.

The TDS returns the money directly to the tenant's bank account, and last week when I spoke to someone at the TDS at the London Landlords' Day, they said they are now processing this return within 5 days (not working days, but 5 days)

Aside from a small percentage of the interest on the tenant's money, there is no charge for this service. Once you have registered one deposit with the TDS, it's dead easy to do another. Once you have made one section 213 notice, it's easy to fill in the details for new people.

And what are you talking about stamp duty for. AFAIK ( since they keep upping these figures), only if your tenancy agreement is for more that £125k for the term of the tenancy, then stamp duty becomes payable, and if it were over £450 p/w rental income, then it is no longer an AST, and the deposit scheme does not apply.

daphne_descends

MattOsprey wrote: »

Why do so many people think that all LL's are money making thieves.
I have let my property in Cardiff today, for £1100 per month. My INTEREST ONLY mortgage is £1170 and I have to pay maintenance charge of £160 pm, plus 3 weeks rent plus vat to the LA.

So on an average month I am down £230 plus £1000 to the LA for finding a tennant. If a tennant stays 10 months that puts me at a loss of £3300 for the 10 months.

My last tannant did his hand over, and I gave him a cheque there and then for his deposit and rent he was owed.

So NO I am not making any money as the above poster assumes. I have taken a huge risk and huge investment, as I was medically discharged from the Army.

I am doing this hoping that over the long term the value will increase and pay me a pension, that I can not guarantee from the state.

Are we supposed to feel sorry for you? If you can't afford to be a landlord, then sell. You said yourself this is a huge risk and a huge investment - one I hope pays off for you. I'm sure it will over time, but whinging about it now suggests it's a burden.

I don't think many people assume LL's are "money making thieves" but there are plenty of examples of such on here. Luckily most of us are aware that these are exceptions rather than the rule.

Gorgeous_George

MattOsprey wrote: »

So on an average month I am down £230 plus £1000 to the LA for finding a tennant. If a tennant stays 10 months that puts me at a loss of £3300 for the 10 months.

With such an astute mind for business have you considered sub-prime lending - this time next year Rodney, we'll be millionaires.

I use the www.depositprotection.com scheme. It's no big deal.

As for wear and tear, there is a difference between w&t and fair w&t. A LL receives 10% of the rent tax free. For me that is about £110 per year in my pocket. Do I spend it on the window cleaner (£5 per month), hedge trimming? It is not enough to cover the unfair wear and tear that some tenants inflict their LL's property.



GG