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administration

The bond and rent

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The bond is paid as cover for the property against losses incurred by you and/or the managing agent. You should be in possession of cleared bond money before you let the tenant move into the property.

What's covered by the bond?
The losses or expenses for the bond would provide cover include those caused by:

  • Damaged items.
  • Accidentally disappearing items or deliberate removal of property.
  • Outstanding debts attached to the property.
  • Failure by the tenant to carry out obligations as set out in the tenancy agreement. In other words, if the tenant doesn't treat the property as they are supposed to or fails to leave it in the state agreed, then they will be liable for any costs involved in ensuring that the property meets those standards. This often includes things like cleaning windows and carpets.
  • Non-payment of rent. Some people forgo deposit and don't make their rent payment in their last month of occupancy of a property. You can use the bond money to cover this and your expenses in recovering the rent from the tenant, for which they will still be liable under normal circumstances.

How much should the bond be?
Bonds are normally for anything from 4 to 8 weeks' worth of rent, though you can ask for any amount you see fit. The norm is to ask for a certain number of rent increments, and although there are no hard and fast rules governing how you are entitled to ask for, you should not be asking for more than two months' rent as a deposit. The bond payment should be by cash, switch, building society cheque or banker's draft, so as to ensure that you have cleared funds by the time the tenant moves in.

The bond money should be kept in a separate bank account. A handy by-product of holding bond money is that you get to generate interest on the sum of money throughout the period of tenure. You are under no obligation to give this interest to the tenant, and if you have a number of properties, this has the potential to generate a useful bit of extra cash.

In addition to the bond, it is normal to ask for rent to be paid one month in advance. Some landlords ask for rent to be paid two months in advance, but this is not particularly common, except in cases where a guarantor cannot be found for a borderline tenant, when an extra month's rent may be asked for up-front as a precaution.

Who holds the bond?
Be clear who is holding the bond. You can hold it, but equally so can be the agent. Normally if there is an agent, the bond will be initially paid to them, but this is not always the case. Many lettings agents collect the deposit on the landlord's behalf and then transfer the deposit directly to them or into a designated client's deposit account. You should tell the tenant who is holding their bond.

Who keeps the bond at the end?
After the tenant moves out, the inventory is checked, and the cost of any damage (except reasonable wear and tear) is taken out of the bond. Anything left is forwarded to the tenant. You must account for this with receipts or invoices if the tenant requires you to. If the cost of the damage is more than the deposit, the tenant will be liable.

Rent payment
You should clarify the rental payment procedures with the tenant before they sign the lease. These days, rent is normally paid monthly, although quarterly or even six-monthly agreements can be arranged. For your own ease of administration, tenants are normally required to set up a standing order or direct debit for the purpose of rent payment. To set this up, you will need the following details for each tenant:

  • The name and address of the bank where the account is held
  • The account holder's full name.
  • Account number
  • Sort code

It is very common for the letting agent to collect the rent from the tenant and for them to pay it to you, after accounting for fees and other deductible expenses. If this is the case, they will provide you with a regular (usually monthly) statement of accounts.

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