Do you have to put deposits in a deposit scheme for room lets?

Hi Joanne

There are many different answers to your question depending upon your circumstances and what you actually mean by the phrase "room lets". I will not go into every possibility here but please can you be a bit more specific about the term “room lets” by answering these questions?

Are you living in the property and taking in lodgers?

Is it a hotel/B&B where you provide services such as cleaning and changing the bedding?

Is it an HMO (House in Multiple Occupation) which you don’t live in or provide services but just rent out rooms?

Whichever of the above you are doing, or indeed if it's something else, please also tell me what type of contract you propose to have between you and the occupiers of the room(s).
.

I am going to guess this is a choice between 'lodgers' or 'tenants'.

Deposit Protection laws only apply to 'Assured Shorthold Tenancies'.

If the landlord lives in the property, it can not be an AST, so deposit protection not required.

If the landlord does not live in the property then it may possibly be a 'license' arrangement but just writing the word 'license' on top of a piece of paper doesn't make it so.

The majority of 'non-live-in-landlords' grant 'Assured Tenancies'. These come in 2 flavours.

The normal 'Assured Shorthold', which does require deposit protection and the less common 'Standard Assured' which does not but gives the tenant much improved tenancy rights and can reduce the capital value of the rented property. Most landlords wouldn't touch SA tenancies but they are quite popular in student-land where the annual turn-over of tenants may make it a worthwhile risk.

Reply to the comment left by "Mark Alexander" at "17/09/2013 - 08:45":

Hi thank you for your reply we are going to open a small HMO ,
I will be giving a room contract for 6 months , and no we won't be living there .
We are going all the legal channels but contracts is a separate thing according to planning so was just wondering if I have to do the bond in a safety scheme because it is a WEEKS notice for both sides
and the bond scheme can take while a while to get returned

Reply to the comment left by "Joanne Morgan" at "18/09/2013 - 02:38":

Hi Joanne

On that basis, YES, you will need to protect the deposits. You can either pay them into the DPS Custodial Scheme which costs nothing but the release has to be agreed by both sides, otherwise you can insure the deposits with my|deposits, TDS or Capita for a small premium and hold them yourself. In the event of a dispute you will have to pay the deposit into the scheme until a decision has been made by the scheme as to who keeps what. Personally, I use my|deposits, check out their website.

As for one weeks notice either way, that a NO-NO I'm afraid. You have to give at least 2 months before you can apply to the Courts for a possession notice and that can take around 3 more months to get. You can't apply to the Courts for possession for at least 6 months unless your tenant is in breach of contract. It doesn't matter what your contract says, this is the law and will override your contract.

Tenants have to give you one months notice or they can just move out without notice on the last day of their 6 month tenancy.

On that basis it is going to be important for you to make sure you get good tenants. Therefore, see my guide on how to do this >>> http://www.property118.com/landlords-buy-to-let-property-investment-strategy/finding-perfect-tenants-and-minimising-risk/

Mark is right this is an Assured Shorthold Tenancy not a Licence and if you did not go through the correct legal process when you wanted to remove a tenant you would be committing Illegal Eviction - this carries very heavy penalties.

As to the deposit it is usual to take 6 weeks deposit and charge the rent monthly in advance. At the end of the tenancy if the tenant has not paid the lasts months rent you will still have 2 weeks rent to cover damages/loses. This deposit must be protected in a Government approved scheme and the tenants must be given the Deposit Protection Certificate and Prescribed Information for Tenants provided by the scheme within 30 days of taking the deposit.

You also need to check that you have met all the HMO Property and Management Standards because HMO are heavily regulated by local authorities. If the building is 3 stories high and you let to 5 or more tenants you will also need an HMO licence, in some areas this also applies to 2 story building - you should check with your local authority web site

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Just to repeat my earlier comment - this does not HAVE to be an Assured Shorthold - it can be an 'Assured' and that does not need deposit protection. Most landlords would feel AST is the best from their PoV despite the deposit requirements but 'Assured' is an option. I have encountered several HMO landlords who have opted for the non-shorthold version.

As this landlord appears to be very new to the business I think mention of a standard assured tenancy only serves to complicate matters as its highly unlikely that the far less favourable rights to obtain possession will be comprehended.

I strongly recommend Joanne to book herself on a landlord accreditation day course to better understand the key rules and laws of the business she is entering into.

Joanne, where are you based? I will then be able to recommend your nearest landlord accreditation scheme.

Reply to the comment left by "Mark Alexander" at "18/09/2013 - 14:11":

Hello thank you for all you advice , I had the environmental officer this week as it is now regarded as two story house and it will be 5 letting rooms on short hold tenancies some only for a month as I am letting to contractors with a weeks deposits he seems to think we don't have to use a deposits scheme the longest room let maybe only for three months.. So still a bit confused ,,
you see I do rent properties to the social services to which they hold the deposit s in there scheme
so room letting is a different area for me to where deposits are involved !

Reply to the comment left by "Mark Alexander" at "18/09/2013 - 14:11":

Hello thank you for all you advice , I had the environmental officer this week as it is now regarded as two story house and it will be 5 letting rooms on short hold tenancies some only for a month as I am letting to contractors with a weeks deposits he seems to think we don't have to use a deposits scheme the longest room let maybe only for three months.. So still a bit confused ,,
you see I do rent properties to the social services to which they hold the deposit s in there scheme
so room letting is a different area for me to where deposits are involved !

Reply to the comment left by "Joanne Morgan" at "22/09/2013 - 23:33":

Hi Joanne

Do these contractors have another home to go back to?