The Tenancy Deposit scheme that went into force from the 6^th of April 2007 is already causing enough problems with Landlords that a leading professional body has advised landlords to take 2 months rent in advance as opposed to a deposit in an effort to avoid some red tape.

The advice was issued last week following a court case in which a landlord was fined £1,500 for not providing the required information regarding the Tenancy Deposit Scheme.

There are 3 schemes from which Landlords can choose:

1. The Deposit Protection Service (The DPS) – This is a custodial scheme where landlords must hand over the deposit in full. Free to use and open to all Landlords and Letting Agents the DPS service is funded entirely from the interest earned from deposits held. If a dispute arises between the landlord and the tenant at the end of the tenancy the scheme will hold the amount until the dispute resolution service or courts decide what is fair.
2. Tenancy Deposit Solutions Ltd (TDSL) – This is a partnership between the National Landlords Association and Hamilton Fraser Insurance. This insurance based tenancy deposit protection scheme enables landlords, either directly or through agents, to hold deposits.
3. The Tenancy Deposit Scheme (TDS) – This is an insurance-backed deposit protection and dispute resolution scheme run by The Dispute Service that builds on a scheme established in 2003 to provide dispute resolution and complaints handling for the lettings industry. The new scheme enables letting agents and landlords to hold deposits.

The advice given by the Residential Landlords Association makes perfect sense at the beginning of the tenancy providing the initial security a landlord would require. The downside comes when you consider the end of the tenancy. In the final 2 months of tenancy, what motivation would the tenant have to ensure the property is properly maintained or would you, as the landlord, be comfortable standing up to the tenant in a dispute if you do not have a deposit to fall back on?

Your Buy to Let Insurance provider will not make any conditions within the policy that you must use the Tenancy Deposit Scheme but they will be the first to see any negative claims experience as a result of not using it. Should the Buy to Let Insurance market prove a tendency for claims in cases that haven’t entered into the tenancy deposit scheme you may notice either it becoming a condition of the policy or that cover is restricted if the scheme is not used.

In order to protect your investment the cover of Malicious Damage by Tenant should always by sought in any Buy to Let Insurance policy you purchase. This will cover you against any damage the tenant causes with malicious intent. This isn’t as widely covered in the Buy to Let Insurance Market as you may think so ensure you are fully aware of the cover provided before you commit to a buy to let insurance policy.

This entry was posted on Friday, September 26th, 2008 at 9:55 am and is filed under Buy to let landlord insurance, Insurance for rented property, Low cost landlord insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.