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frugalista

Days Of The Deposit Scam Are Numbered

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Much has been made of the Housing Act's plan to introduce home information packs, and the effect this might have on the market. Measures which give tenants more rights should also help bring down the value of BTL. Another measure which the housing act introduces is tenancy deposit schemes, which should hopefully end the "deposit scam" which less scrupulous landlords know and love.

For those not blighted by dodgy landlords, the deposit scam is this: tenant pays the last month's rent, moves out, and expects that big deposit cheque back from the landlord. Surprise surprise, the grubby little penny pinchers have invented numerous reasons to keep the tenant's money. Presumably the less savoury BTLers see this as a little bonus earner to smooth over the possibility of a couple of void months.

Not for much longer, it seems. Browsing on shelter.org.uk's website turned up this summary of the Housing Act 2004:

the Act requires that a deposit can only be taken if it is safeguarded by a tenancy deposit scheme. It places a duty on the Secretary of State to secure the availability of tenancy deposit schemes. These may be either custodial or based on insurance guarantees, and will need to offer dispute resolution independently of the courts. The clauses allow the Secretary of State to establish tenancy deposit schemes with private organisations, or to make arrangements with public bodies to secure the establishment of the schemes.

A landlord, or a letting agent acting on his behalf, will have 14 days after receiving the deposit to ensure that it is safeguarded by a scheme, and to provide the tenant with information about the scheme and how it works. Landlords who fail to comply will be subject to sanctions, and, until any deposit taken is safeguarded, they will lose the right to serve a tenant a ‘section 21 notice’ for possession with two months’ notice. If the landlord or his agent has not complied within 14 days, the tenant can now also apply for a court order, requiring the landlord to either return the deposit or pay it into a custodial scheme, and an order requiring the landlord to pay the tenant an amount equivalent to three times the deposit.

Shelter welcomes the changes, and believes that the increased certainty of facing financial penalties will motivate landlords to comply with the provisions.

These provisions are expected to come into effect in 2006.

http://england.shelter.org.uk/files/docs/9...icybriefing.pdf

frugalista

Edited by frugalista

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I'm sorry but for every dodgy landlord there are 2 tennants who trash the houses and then don't pay the last months rent. I've been stitched up twice. Most landlords will welcome this law with open arms, they might be able to recover the full cost of repairing the damage rather than having to make do with the deposit and also be able to stop the tennants going from one house to another causing havoc and getting away with it.

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Is there anything in the act to cover Landlords when a tenant moves out having not paid the last months rent as is quite often the case, and there are costs for the Landlord to cover such as cleaning, and unpaid bills. ?.

I would think that this new act will in fact encourage more investors to BTL as the business takes on a more professional personal and moves away from the "Rising Damp" image of yesteryear. Its now very OK to live in rented property, and it comes without stigma as was the case in the past. The future of the UK is that the majority will in the future have to live in rented property as is the case in Europe.

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Much has been made of the Housing Act's plan to introduce home information packs, and the effect this might have on the market. Measures which give tenants more rights should also help bring down the value of BTL. Another measure which the housing act introduces is tenancy deposit schemes, which should hopefully end the "deposit scam" which less scrupulous landlords know and love.

For those not blighted by dodgy landlords, the deposit scam is this: tenant pays the last month's rent, moves out, and expects that big deposit cheque back from the landlord. Surprise surprise, the grubby little penny pinchers have invented numerous reasons to keep the tenant's money. Presumably the less savoury BTLers see this as a little bonus earner to smooth over the possibility of a couple of void months.

Not for much longer, it seems. Browsing on shelter.org.uk's website turned up this summary of the Housing Act 2004:

http://england.shelter.org.uk/files/docs/9...icybriefing.pdf

frugalista

This will presumably only apply to new tenancies begun after this new act takes effect, or will all deposits held when the law takes effect have to be safeguarded in this way?

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I'm sorry but for every dodgy landlord there are 2 tennants who trash the houses and then don't pay the last months rent. I've been stitched up twice. Most landlords will welcome this law with open arms, they might be able to recover the full cost of repairing the damage rather than having to make do with the deposit and also be able to stop the tennants going from one house to another causing havoc and getting away with it.

Sure, it happens. You take them to court, sue them, recover the costs, and do up the property. As if. The law only works for the very rich and the very poor, because the former can afford it and the latter aren't worth bothering with.

One of the benefits of an OO society is that people have a stake which means they have something to lose - and they are worth suing, because they are identifiable, relatively immobile and have assets. In a society of rentiers and dispossessed renters who have relatively little stake this doesn't apply (apart of course from STRs and people renting who have money, but they aren't the ones who are going to trash places in any case). So BTLers are collectively bringing about the sorts of happenings you're complaining about - while at the same time bringing about the conditions in which they can't recover their losses.

At bottom this is probably inevitable - you've just been unlucky that you've been caught out. Can you not get insurance for this? Oh, and please don't think I'm condoning this sort of behaviour, because I'm not. Just being pragmatic about it; its a business risk that ought to be priced in, either individually or collectively through insurance. And if it isn't or can't be priced in then that casts doubt on the underlying business model.

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I agree that there are probably just as many dodgy tenants as there are dodgy landlords. However if you have speculated in property with the intention of renting it and making a profit then you should also evaluate the risks involved in your investment. One of those risks is dodgy tenants and your calculations of profit should take that into account.

However if you are a tenant, especially in these 'priced out' times. Why on earth should you have to sholder the risk of a dodgy landlord on top of having been priced out of a home by the bugger.

Of cause TTRTR will say that legislation like this will force up rents, but I don't see how this will effect reputable landlords who are not dodgy so I think the effect on rents will be negligible.

It's about time.

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The EDMO's will bring an increase in available residential units. How many empty properties are out there that could become subject to EDMO. Many owners that are not resident and have no tenants will either quickly find tenants or sell up.

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Is there anything in the act to cover Landlords when a tenant moves out having not paid the last months rent as is quite often the case, and there are costs for the Landlord to cover such as cleaning, and unpaid bills. ?.

I would think that this new act will in fact encourage more investors to BTL as the business takes on a more professional personal and moves away from the "Rising Damp" image of yesteryear. Its now very OK to live in rented property, and it comes without stigma as was the case in the past. The future of the UK is that the majority will in the future have to live in rented property as is the case in Europe.

No they won't and no it won't. Desperate wishful thinking there.

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I'm sorry but for every dodgy landlord there are 2 tennants who trash the houses and then don't pay the last months rent. I've been stitched up twice. Most landlords will welcome this law with open arms, they might be able to recover the full cost of repairing the damage rather than having to make do with the deposit and also be able to stop the tennants going from one house to another causing havoc and getting away with it.

That's fair. I rent and really value and look after the house I'm in. I detest the idea of tenants trashing places - it gives us good ones a bad name.

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I'm sorry but for every dodgy landlord there are 2 tennants who trash the houses and then don't pay the last months rent. I've been stitched up twice. Most landlords will welcome this law with open arms, they might be able to recover the full cost of repairing the damage rather than having to make do with the deposit and also be able to stop the tennants going from one house to another causing havoc and getting away with it.

I agree, the scrupulous landlord has nothing to fear from this act, in fact they are now more protected from bad tenants. All in all a good act.

But note that the BTL craze was built on the fact that the law was skewed in favour of unscrupulous landlords, by allowing things like the deposit scam.

frugalista

Is this going to give the inland revenue an easy route to spotting landlords who are not paying tax on rental income too?

Well spotted! Now I come to think of it, it is currently very easy to avoid any kind of paper trail at all on a BTL, and thereby do a bit of tax evasion. With the new law it will be impossible. Undoubtedly many amateur BTLers are doing exactly this, probably many do not even realize they are breaking the law.

It could also give mortgage lenders a way to check if a property is a BTL. If the LL has it on an OO mortgage (as undoubtedly many do) they could be in for a nasty shock.

frugalista

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This will presumably only apply to new tenancies begun after this new act takes effect, or will all deposits held when the law takes effect have to be safeguarded in this way?

I don't know. I think a sensible policy would be to give existing landlords a year or so to put the money in a tenant deposit scheme. Perhaps that will bring a few cash flow problems out of the woodwork?

frugalista

Could someone tell me when the 2004 act comes into force.

Some time in 2006, according to Shelter, who campaigned for the act. Perhaps the ODPM or Housing minister would know?

frugalista

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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