rent deposits

[lawstudent]

if there is a rent deposit (a sum held specifically to be be used if there are rent arrears) and the tenant stops paying his rent, would one be able to put in a claim for possession immediately or would one first have to "use up" the rent deposit?

[davidjohnbutton]

I would say that one would have to use up the deposit IF there were a term permitting it to be used as such in the rental agreement because the tenant, whose money it is, has specifically given permission for it to be used in that way.

So for example, Deposit held £750. Rent £500 a month - in arrears by 2 months = £1000 - less deposit £750 now = £250

However, if after deducting the deposit, you ended up with two months or more worth of RA, then one could issue a S8 based on that and advise the judge that the deposit had been accounted for as rent.

The one argument that might come into it is use of specific words in the agreement. If it merely says that the deposit "can" be used as rent arrear coverage instead of "will" be used, then it lays open arguments as to whether there is merely an entitlement on the part of the landlord, or a duty.

Personally, I would prefer to keep the two separate - the deposit is there to cover damages, not to be used as a safety net by the tenant for rent.

[Jennifer_M]

I guess one problem that could arise is if you take a rent deposit as well as a deposit in case of damages etc. it could in total amount to more than 2 months rent which would make it a premium.

[dazalock]

This poses another question Ive wondered about. A tenant pays a deposit of say £500 and a month rent in advance of say £500, the rent falling on the 1st of the month. If a couple of months later, the tenant doesnt pay the rent. So when does the S8 clock start ticking. Is it as soon as he doesnt pay the rent, which is in advance so not actually in arrers yet, or does it start on the 1st of the following month when the rent is now in arrers by one month.?

Confused yet?

[lawstudent]

thanks both of you - interesting

I suppose a way around both these issues would be for the rent to be payable quarterly in advance instead of monthly

[Jennifer_M]

I don't think it would change anything really as it doesn't matter how often the rent is paid in a year, if the tenant doesn't want/can't pay he just doesn't. You still have to wait for him to be 2 months in arrears (rent actually due, not just missed an early payment) to start any proceedings.

[lawstudent]

yes - but at least the LL could get a few months' rent at the start of the tenancy without its being regarded as a premium

[Jennifer_M]

Yeah but after the initial payment nothing stops the tenant from not paying; just delaying the problem.

And to be honest if just a few LL used this "solution" they would find it much harder than others to find tenants because who'd want to give the LL 2 months rent on top of a deposit because the LL can't trust them to pay the rent at some point ?
We have to remember that the majority of tenants actually pay their rent on time so it would penalise the honest tenants because of a small percentage of professional parasites.

[Paul_f]

I think DJB has hit the nail on the head here.

Deposits should be specifically for dilapidations. Another point is that if you don't specify it exclusively for dilapidaitons it automatically can be offset against rent arrears and can affect any rent guarantee insurance held by the landlord. Insurers insist that rent arrears are set aginst the deposit if it has not been defined!

[lawstudent]

Interesting - thanks Paul

[lawstudent]

dazalock seems to answer his own question, If rent is payable in advance, it is in arrears from the day it should be paid but isn't ... so a month later (as dazalock himself observes) there is a month of arrears