X

Sign Up

or

By signing up I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Sign Up

Sign Up With Facebook, Twitter, or Google

or


By signing up, I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Log In

or


Don't have an account? Sign Up

Forgot Password

To reset your password just enter the email address you registered with and we'll send you a link to access a new password.


Already a PT member? Log In

Don't have an account? Sign Up

  • Deposit Protection

    Not taking a deposit?

    What are peoples views here on NOT taking a tenant deposit at the start of a tenancy?

    Does a deposit really protect you at all especially as the deposit must be held in a deposit scheme that can be a pain to resolve. It is often the case that a tenant will not pay the last months rent as they see it that you have 1 months money off them and are you really going to take them to court for 1 months rent?
    Also how far will 1 months rent cover any damages? if a tenant decides to totally trash your place will 1 months rent help much?

    I know of one landlord locally who does not take a deposit but charges a slightly higher rent for example on a 650 pcm prop rather than taking 650 deposit + 650 rent in advance + any other admin fees an agent charges he will just charge 700 pcm with no other fees. although long term it is costing the tenants more it is much more affordable for them at the outset, enabling more money for furniture etc. The landlord is also making more money and so minimises the losses when things go wrong.

    Any views welcome....
    1
    0
    Good question.

    1. I have always taken a deposit and have not had issues with the deposit schemes, etc.

    2. If someone lacks the fund to move in, what sort of signal is that? Lowering the move in amount is not a great idea in my book.

    3. I see the concern about the tenant not paying the last month's rent and expecting the deposit to cover it. That is a risk.

    4. Tenants who do not follow the contract can be reported or otherwise flagged up. Most tenants who are responsible do not play games. Just like most landlords do not intentionally break the rules. There are rogues in both groups.
    0
    0

    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    I agree with John Corey.

    We always take a deposit. We are careful with tenants and want to ensure that they have the means to pay the rent.

    For those tenants who fail referencing, we insist on 6 months upfront payment plus deposit, otherwise we move on.
    0
    0
    John (Singapore)
    Londonproperty123.blogspot.com
    I guess you should think of the Deposit as really something that provides a positive incentive for the Tenant to return the property in a clean and good condition, at the end of Tenancy.
    If you view a Deposit as protection from a tenant who may well trash a property, or not pay the last months rent, and leave the property in a poor condition - well you have just chosen the wrong tenant, i'm afraid.. Or perhaps as many landlords forget, they were a poor landlord, who the tenants mistrusted!
    Your local landlord who chooses to market a 650.00 property at 700.00 will on paper be making a greater profit. But.... If you consider he will eliminate a vast pool of perfect tenants by overcharging, and will be left to fish & choose a tenant only from that small pool who have no choice! My guess would be, his wear and tear on properties, voids and problems, will financially lose more money in the long run..
    I was delighted when the Deposit protection schemes were brought in, as it professionalises our business, and gives good tenants security they never previously had. I use mydeposits.co.uk, as it gives me the opportunity to control the Tenants Deposit myself.. i.e. i can directly transfer the full Deposit back to them within hours of the Tenancy ending..
    1
    0
    I take a deposit because I want to hold something that my tenants want back to help to ensure that they give me what I want back. It's not about money its about balance.

    I have never had a problem and I rarely stop monies from deposits because I am very realistic about what is fair. I agree with MKlandlord by holding the deposit yourself - I too use MyDeposits - you can return it quickly at the end of the tenancy and both you and the tenant can move on.

    I always take 6 weeks rent as a deposit to avoid them not paying the last months rent.


    ------------------------------

    The perfect present for property investors @ £4.64. My book, where I warn about the storm clouds that are gathering for landlords is available on Amazon title. Property For Rent – Investing in the UK: Will You Survive the Mayhem? https://www.amazon.co.uk/dp/1484855337
    1
    0
    Follow me on Twitter @landlordtweets
    I agree with Mary that taking more than one months rent is sensible. Somehow i have never dared to ask for six weeks, so i settle one one months rent and add on 200-250

    The Mydeposits scheme runs so perfectly, and like Mary i rarely make a deduction. In fact i have made only one 40.00 deduction, agreed most amicably with my tenants, since the scheme started back in 2007. And approx 18 Deposits handed back in full, within hours - Happy Tenants - Happy Landlord - which is what as professional landlords we should aim for every time.

    I'm sure i read somewhere that Mary fought very, very hard to have an insurance backed scheme like Mydeposits.. So thank you Mary, i do really value My deposits immensely!!
    1
    0

    Never take a deposit my self,more bureaucracy,as I trust the tenants to take care of the place and I tell them that when we agree the tenancy.Yes have had some repairs and I usually have a spruce up on the paintwork but not much money needed.Pay's yer money......
    0
    0
    If by not taking a deposit, you can get a home owning guarantor that the tenant cares about then you can get better overall protection.

    There are people that will pay more rent, to avoid having to borrow money for a deposit. I still come across people that believe that deposits are never return, so see them as “dead money”. (This is mostly people that don’t rent, but may be asked to lend someone the money for a deposit.)

    I don’t think you have to accept worse tenants by not taking a deposit; however you get a lot more low quality tenants viewing so need to do more shifting of them. Someone that does not wish to pay you a deposit, is unlikely to want to pay the next landlord a deposit, so it more likely to remain with you for a long time.

    Out of our current 3 properties, I would only consider not having a deposit on 1 of them, the other 2 are in part of the market when anyone that is right for them will have money in the bank.
    0
    0
    Taking a "deposit" requires the landlord to have it protected at a deposit protection scheme.

    However, can a LL take a sum of money and give it a different name, such as a "management fee" or something else. Then, return that "fee" to the tenant at the end of the tenancy so that no deposit protection is needed?
    0
    0
    Guys, your input has been great so far. Thank you.

    @ John Corey

    Taking a "deposit" requires the landlord to have it protected at a deposit protection scheme. However, can a LL take a sum of money and give it a different name, such as a "management fee" or something else then return that "fee" to the tenant at the end of the tenancy so that no deposit protection is needed?

    I researched and found lots of people online advise against RGI as they rarely pay out. I don't know if this is true.

    However, my alternatives to taking a deposit include;

    > Charge a non refundable admin fee of £150 for every tenant (for room lets).
    > One month rent in advance
    > Always get a guarantor

    Question 1. Can you add to the above list?

    Question 2. Could I avoid a deposit by taking two months rent in advance? The tenant would then not need to pay the last months rent PLUS they'd get their extra one month "overpay" back at end of tenancy.
    0
    0