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  • Deposit Protection

    Custodial vs. insured schemes

    Hi guys.
    I've read up about the difference between custodial and insurance deposits. I am after a few more comments from those experienced landlords on here.

    I am leaning towards using a custodial deposit but the biggest problem I have heard is that if they disappear then the deposit is locked away and inaccessible. Are the term with DPS new terms under 20d and would they be used in this instance?

    d. If either Party does not agree to use our Dispute Resolution Service to resolve the Dispute, they must resolve the matter by agreement or through the courts. The Party refusing to use our service must start the required court proceedings within 6 months of notifying us of their refusal. If they do not, we may award the disputed amount to the other Party.

    If there is a dispute then you have to send the deposit to the scheme used anyway.

    I would probably prefer the deposit in a separate account out of the way also.

    Any comments welcome thanks.

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    I prefer to have the control and have the money in my account and resolve any issues personally

    I`ve never got to the point when i need to send it in

    Its protected in a client protected account

    I see the deposit scheme dispute service therefore as a 2nd port of call rather than a 1st


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    Jonathan Clarke. http://www.buytoletmk.com

    Thanks for the reply JC. Is the control really an illusion though as if there was a dispute you have to send the money out of your account where it would already be anyway?

    Would it not be the same with either scheme where you can resolve issues personally?

    Or is it case that when you have your dialogue with the leaving tenant, you return the agreed amount and just keep the rest in your account and this is more difficult if the money was in the scheme's account?

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    Yes one could argue the difference is marginal . Its a personal preference

    In any dispute though if the money is in your account initially you have more control

    3rd parties may have staff problems / financial problems / be hacked / not be good adjudicators etc etc

    Maybe its me being too paranoiac

    It does  gives me leverage to a certain extent in my favour in a dispute in that i can promote the notion that i can sort out any differentials within minutes and hand the deposit back there and then without both parties having to form fill and wait . Because of this tenants are more readily agreeable to a figure than otherwise they may have been. I and they are going to know and understand the detail of say the history of what i may considered excessive wear and tear on a certain carpet rather than an anonymous 3rd party  . I may say 100 quid they say 50 and we agree in a minute on 75 and shake hands . I would prefer to give them 25 extra to save form filling and explanations and photos and inventories and they indicate  likewise . Trust is a strong element with me and my tenants. The Deposits schemes were a necessary add on though as some tenants were being ripped off as were some LL`s . I`m happy to have them there as a back up but not happy for them to hold  £1000`s and £1000`s of money which essentially isn`t theirs .

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    Jonathan Clarke. http://www.buytoletmk.com

    Thanks again JC. You've given me some things to think about there. I've got a couple of weeks to think it over anyway so hopefully I would have come to the correct decision for me by then.

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    Thanks Nick. Have watched that and read through other threads on the subject and I was just after a few more opinions from landlords in case there was any other point that hadn't come up yet. What is your preferred option and why please if you don't mind me asking?

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    Condition 20 is for when both tenant and landlord have responded but are unable to reach agreement. Condition 19 outlines the process when either party fails to respond to written notification about return of the deposit/deductions are to be made.

    I use the Custodial Service as there is no fee to pay. You also do not collect any interest but this is minimal.

    My understanding id the custodial repayment process is easier if both parties are responding. I meet/email the tenant and we agree any deductions. I can then either document this in the DPS website (custodial scheme) or in a letter/email (insurance scheme). With the custodial scheme there is nothing more for me to do if they agree to the deductions. With the insurance scheme I need to send them the money (with the potential to get the bank account details incorrect). If the deductions are disputed then I need send the disputed amount to the DPS with the insurance scheme. I don't know if the dispute resolution process is different between the two schemes but I doubt it. You would be required to pay the tenant any money within a specified period of time after the DRS has made a decision with the insurance scheme.

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