Uses of Your Rent Deposit by Landlords

Posted on August 18th, 2008 | by John Glenn |

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Rent Deposit! In the simplest form a rent deposit should be a sum of money handed over by a tenant to a landlord at the start of a lease as security for payment of rent. Rent deposits for residential premises are now protected by regulations, but for commercial purposes it is not protected by such regulations. A landlord must join a Tenancy Deposit Scheme and failure to comply with the regulations entitles the tenant to sue for compensation equal to three times the value of the rent deposit.
In an ideal situation, the landlord should not hold the deposit. It should ideally be held in an account operated by the landlord’s solicitor to ensure the funds are not misappropriated. Who is entitled to interest on the deposit? This should always be the tenant as it is the tenant’s money. The lease or rent deposit deed should specify that the landlord should put the money into an account that pays interest and that the interest should be paid to the tenant.

In what circumstances can the landlord withdraw money from the deposit account? The landlord should only be allowed to withdraw money for non-payment of rent. The landlord should also not be entitled to withdraw money for non-payment of service charge as the reason for the non-payment may be a dispute over the amount of the service charge.

When should the deposit be repaid to the tenant? the tenant should be entitled to the return of the rent deposit if a point is reached during the term that enables it to demonstrate its financial strength. The rent deposit should also be returned to the tenant if it sells the lease and also at the end of the term.