When considering renting out a property to a new tenant, there are many procedures that you will go through such as drawing up a tenancy agreement and vetting the prospective tenant. You should also consider taking a deposit from the tenant to provide you, the landlord, with some financial protection.
There is no set amount for a deposit agreed between landlord and tenant. In fact, a landlord does not need to take a deposit but that is probably not a sensible course of action to take.
Generally speaking, the most popular level of deposit taken these days equates to one month’s rent. However, some landlords will insist on a higher sum especially as we have seen more tenants go into arrears in recent years due to the recession that we went through.
So, what sorts of things could a deposit be used to protect? Well, one of the most popular things is to cover missed rental payments. If one of your tenants falls behind with their rent it could have a severe impact on your own finances as, after all, it is a business that you are running. By taking a deposit, this would provide you with some peace of mind.
Another thing that a deposit could cover is if your tenant fell behind in paying one of the bills such as the gas or electricity. Whilst the utility companies are usually supportive when dealing with customers that get into arrears, it would be preferable if the problem were resolved sooner rather than later.
Unfortunately, all too often, damage is caused to either the building such as a cracked window or to the contents such as a settee or dining table. Yes, it may be possible to claim on your landlord insurance but, on some occasions such as with small sums, you may prefer to rely on the tenant’s deposit to cover the repair/replacement costs.
We hope that the above has been informative.