You or your agent will probably take a deposit from the tenants so that money is available to repair damage beyond normal wear and tear or to reimburse you if they leave without paying the rent. It is essential that this is properly protected in accordance with the deposit protection rules. These aim to ensure that the cash is properly looked after so that it is available for the tenants at the end of the tenancy and does not go missing. The rules also aim to help to resolve disputes between landlords and tenants.
If you do not protect the deposit properly you may have to pay the tenant a penalty of up to three times the value of the deposit and you may have serious problems if you try to regain possession of the property. Normally with an assured shorthold tenancy the landlord can evict the tenant at the end of the initial term by serving two months notice. However this may not be possible if the deposit has not been protected.
There are several approved schemes for protecting deposits and you must protect the deposit within 30 days of receipt. You must also give the tenant certain information "the prescribed information". There is plenty of information about deposit protection on the internet and the various providers' websites will help you to work out what you need to do. There are two types of deposit protection scheme, "custodial" and "insurance based". With the custodial scheme the scheme provider actually holds the cash and with the insurance scheme the landlord holds it but the risk of default is covered by an insurance policy.
The deposit remains the tenants property and should not be used by the landlord without the tenants' consent or unless the tenancy agreement permits it.
At the end of the tenancy the landlord must repay the deposit to the tenant in full unless there have been breaches of the tenancy agreement- serious damage for example. In this case the landlord should try to reach an agreement about deductions to cover the repairs but if this is not possible the deposit protection scheme should be able to offer a service to try to resolve the dispute.
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