The taking of security deposits has come to be accepted by landlords, tenants and the courts as normal practice in residential lettings in the UK. However, unlike in some countries, there are no statutory rules laid down. Deposits are contractual between landlord and tenant and the detail - what the deposit covers, interest payable etc - depends very much on what the agreement says.
The usual items are listed below, all of which should be referred to in the letting agreement.
The amount of the deposit should be a maximum of two months' rent. If the deposit is more than this amount it could in theory count as a premium and may give the tenant an automatic right to assign the lease without the landlord's consent.
This eventuality of assignment should be precluded by the terms of the tenancy agreement anyway, but as a precaution the deposit should be kept below two months' rent.
One month's rent is a common figure, though some landlords avoid this as it could encourage the tenant to substitute the deposit for the last month's rent - 5 or 6 weeks may be acceptable.
From 6 April 2007, all deposits (for rent up to £25,000 per annum) taken by landlords and agents for Assured Shorthold Tenancies (AST) in England and Wales have to be protected by a government authorized tenancy deposit scheme. (ASTs are the usual tenancies made between a private landlord and his tenants.)
To avoid disputes going to court, though the schemes won't prevent you going to court if you want to, each scheme is supported by an alternative dispute resolution (ADR) service, whose aim is to make disputes over the repayment of the deposit faster and cheaper to resolve.
If there is a dispute regarding damage or breach of the tenancy terms then the ADR service will become involved, otherwise the tenant's deposit will be returned without delay.
The onus of proof will be on the landlord or agent. They will need to provide reliable evidence, usually in the form of an inventory, or a schedule of condition and photographs, to support their claim for deductions from the deposit.
The court route is still open to the parties to resolve a dispute and in cases where the damage claim exceeds the deposit.
All the deposit insurance alternatives are dependent on the tenant/s passing a comprehensive tenant check.

The custodial scheme is to be provided free of charge for landlords and agents, paid for by the interest earned on the monies deposited into the scheme fund. It is to be run by financial and investor services company Computershare Investor Services Plc who have been awarded a contract by Government.
This company have administered a similar deposit scheme in the Australian state of Victoria for the last eight years. Online self-service will allow landlords to register and make deposit payments, transfers and repayments 24 hours a day.
Paper based transactions will also be supported. Help and advice will be available through a dedicated call centre during office hours. An independent Alternative Dispute Resolution (ADR) service, run by the Chartered Institute of Arbitrators, will help to resolve any disputes quickly and without the need for court action.
The tenant pays the landlord or letting agent their deposit. The landlord/agent pays the deposit into The DPS within 14 days of receiving it. Following receipt of the deposit, The DPS will provide confirmation and details of the protection scheme being used to both the landlord/agent and the tenant.
The tenant pays the deposit to the landlord/agent who pays it into The DPS within 14 days of receiving it. The DPS will provide confirmation and details of the scheme to both the landlord/agent and the tenant. At the end of the tenancy, the landlord/agent and the tenant agree repayment of the deposit and inform the scheme.
The deposit repayment, divided accordingly and including any interest accrued, will be paid to each party within 10 days. If there is a dispute, The DPS administrators return any undisputed amount (plus interest) to the relevant party, but hold the disputed portion until the ADR service or the courts decide what is fair.
For further details visit www.depositprotection.com
Tenancy Deposit Solutions Ltd (TDSL) is a company jointly owned by the National Landlords Association and Hamilton Fraser Insurance (HFIS plc). They have been awarded a government contract to operate an insurance-based tenancy deposit protection scheme.
The scheme will be sponsored by the NLA and administered by Hamilton Fraser Insurance, a company authorized and regulated by the Financial Services Authority. An insurance based tenancy deposit scheme is a membership scheme allowing the landlord to continue to hold any deposit they take from a tenant during the period of the tenancy agreement.
The landlord will be required to pay a fee to protect any deposits taken from a tenant. If there is a dispute over the return of the deposit at the end of the tenancy, the scheme, supported by an insurance policy, will ensure that the amount to which the tenant is entitled is returned.
As necessary, the scheme insurers will recover the disputed amount from the landlord. The scheme is also required to provide deposit dispute assistance (ADR) which will be provided free of charge to all parties.
Any landlord resident in the United Kingdom (excluding the Isle of Man) can apply to join the scheme. Membership of the scheme is not dependent on membership of any trade body or professional organizations, though concessions are available for members of NLA or recognized professional associations for agents.
For further details including fee structures visit www.mydeposits.co.uk
The Tenancy Deposit Scheme run by TDS was originally set-up for regulated agents around 5 years ago. Still primarily aimed at letting agents, the scheme does however make provision for landlords to register.
Regulated agents are members of the Association of Residential Letting Agents, the Royal Institution of Chartered Surveyors, the National Association of Estate Agents, The National Approved Letting Scheme (NALS) or other bodies which regulate the activities of their members and are covered by a recognized bonding scheme which protects and insures deposits.
The agent or landlord holds the deposit as at present or in a special client account. A company called The Dispute Service (The Dispute Service Limited) has been set-up to ensure protection.
If there is no dispute the agent or landlord repays the deposit, but if there is a dispute the agent or landlord is given a couple of weeks to resolve it. After that, any disputed amount is transferred to TDSL and an adjudicator is appointed who will issue a decision within 10 working days of receiving all the necessary evidence.
For further details visit www.tds.gb.com
The Energy Performance Certificate (EPC) gives home owners, tenants and buyers information on the energy efficiency of their property. It gives the building a standard energy and carbon emission efficiency grade from 'A' to 'G', where 'A' is the most efficient and with the average to date being D.
Example of energy efficiency rating graph for homes

EPCs are measured using the same calculations for all homes, so you can compare the energy efficiency of different properties.
Part of the EPC is a report which will list the potential rating that your home could achieve, if you made the recommended changes. The report lists:
You can use this information to:
You do not have to act on the recommendations contained in the recommendation report. However, if you decide to do so, then it could make your property more attractive for sale or rent by making it more energy efficient.
The EPC is required by law when a building is constructed, sold or put up for rent.
If you are a landlord, you'll need to make an EPC available to prospective tenants the first time you let a home after 1 October 2008. An EPC is only required for a property which is self-contained, and is valid for 10 years.
An EPC isn't required when a tenant rents a room and shares facilities.
An HMO is a property that is shared by three or more tenants who are not members of the same family. Depending on the exact type of HMO some landlords must have a license from the council.
All HMOs, whether the landlord needs a license or not, are subject to Management Regulations and Inspections under the Housing Health and Safety Rating System (HHSRS)
This ensures that the property is managed properly and meets certain safety standards. The license will be valid for up to three years, and will then have to be renewed.
You should contact you own local authority (where the property is located) for confirmation of specific rules and regulations regarding HMOs.
Letting property demands knowledge of your obligations regarding a whole host of rules and regulations. This section is designed to make the process easier. Some of these regulations are compulsory, with specific legislation and statutory codes to be complied with by landlords, for example the Gas Safety Regulations. In other cases, rules on compliance are less clear cut, for example, electrical checks. Here, no specific legislation applies to enforce regular checks, though in practice landlords are under an obligation to make sure systems are safe.
Obligations are different between residential and commercial tenancies. In the case of residential tenancies the landlord generally carries a greater burden of responsibility for the safety of tenants.
There are some very compelling reasons why landlords (and agents) should make absolutely sure that their properties are entirely safe for tenants. They should also be aware of all the safety issues and the legal requirements surrounding the letting of property.
The Consumer Protection Act (1987) and The General Product Safety Regulations 1994 (European Communities Act 1972) require:
The main areas you need to be concerned about are:
In addition to the statutory annual Gas Checks it is advisable to carry out an annual inspection (Risk Assessment) of the entire premises and surrounding grounds for obvious safety hazards:
Having a Safety Checklist for an annual inspection (Risk Assessment) would be very useful evidence of your due diligence in these matters in the event of an accident.
None of the safety regulations in force give landlords or agents a right to enter premises without the tenant's permission. It is always advisable to give tenants at least 48 hours notice of a requirement to enter for maintenance or inspections.
It is advisable to have the electrical wiring system professionally inspected every 5 years and brought up to the current Electrical Regulations standard.
Think carefully about the equipment and furnishings you are providing with the property. There are now no real advantages to letting residential property fully furnished. Many properties will let perfectly well unfurnished or partly furnished - indeed tenants with their own furniture will often prefer it.
It is a criminal offence to supply any item with a property which is unsafe. Some items such as oil heaters, portable LPG heaters, DIY tools, glass furniture and garden tools are particularly hazardous - you would be well advised not to supply any of these.
Don't forget to check the property before a new letting to ensure that no items have been left by previous tenants, which could be defective. You should pick this up when you do the Inventory.
By keeping the items you provide to a minimum, especially upholstered furnishings and electrical appliances, you are reducing your risk considerably.
Unless the rented accommodation is a House in Multiple Occupation (HMO) there are no specific fire regulations for residential tenanted properties in England and Wales.
However, regulations do now apply to furniture and furnishings and fire alarms. It would be wise to discuss the fire safety aspects with your local fire prevention officer and follow the advice given.
Landlords are under a common law duty to ensure that the property they provide is safe. All residential properties in England and Wales should comply with building regulations on aspects such as:
Local Building Inspectors and Fire Prevention Officers will advise landlords on these aspects.
As a minimum, landlords should remove potentially dangerous appliances and heaters and fit smoke alarms. A fire extinguisher and kitchen fire blanket might also be a wise precaution.
Again, there is no requirement for this, but an annual safety check (risk assessment) is a wise precaution for any landlord or agent. Documenting this on an annual basis will provide adequate evidence of due diligence on the landlord's or agent's part in the event of an incident.
The building regulations require that all properties built after June 1992 must have mains operated inter-connected smoke alarm fitted on every level of the property.
Older properties do not have to comply but landlords would be well advised to provide at least battery operated smoke alarms in the property.
It is important to determine who is responsible for testing and maintaining the smoke alarms - the landlord, agent or tenant. If the agent is to be responsible, this should be noted in the management contract. If the tenant is to be made responsible for this then adequate warnings must be given in writing.
Documents such as the tenancy agreement, the inventory and the appliance operating instruction and emergency procedures information pack given to tenants, should mention the responsibility of the tenant to test and replace batteries in smoke alarms when fitted.
There is no compulsory requirement to provide fire extinguishers or fire blankets in normal tenanted properties, but again, this may be a wise precaution, at least in the kitchen area.
Having made the decision to provide fire extinguishers though, the landlord or agent should then arrange for a 12 monthly service.
All Landlords have a common law duty to ensure that gas installations and appliances supplied with their properties are safe. Tenants also have certain legal obligations when it comes to gas safety - see below.
In the case of residential properties, landlords (or their agents) have a statutory duty to arrange annual Gas Safety Checks by a registered CORGI installer.
A copy of the CORGI safety certificate must be given to the tenant on entry and within 28 days of the annual check. A copy must also be retained by the landlord for 2 years.
About 30 people die every year in the UK through poorly installed or badly maintained gas appliances and flues resulting in deadly carbon monoxide poisoning.
Residential landlords or their agents are responsible for the safety of tenants and the Gas Safety (Installation and Use) Regulations 1998 enforced by the Health & Safety Executive (HSE). They deal with the duties of landlords to ensure that gas installations, appliances, fittings and flues provided for tenants are safe.
Severe penalties for non-compliance can be imposed and deaths could result in manslaughter charges for landlords and agents. Non compliance is a criminal offence and courts can impose unlimited fines and custodial sentences. This may also invalidate your property insurance and could subsequently lead to claims for civil damages - awards in these cases have proved to be very high indeed.
Furniture and furnishings supplied in rental accommodation must comply with The Furniture and Furnishings (Fire) (Safety) Regulations 1988 (as amended).
Furniture which complies carries a manufacturer's label which must be permanent and non-detachable.
In fact there is no legal definition of furnished, unfurnished or even part-furnished in the UK. These are terms, which have come about through practice, in reality have no industry standard.
What is defined is all furnishings supplied must meet fire safety standards and it's in your interests as a landlord to check electrical appliances before a tenancy commences and have the electrical system checked periodically.
If you let property you must ensure that the electrical system and all appliances supplied are safe - failure to comply with the Electrical Equipment (Safety) Regulations 1994 and The Consumer Protection Act 1987 is a criminal offence and may result in:
These regulations are enforced by the Health & Safety Executive.
It is important to ensure that all electrical appliances and fittings within the property are safe and in good working order. Unlike gas regulations, there is no law that says you must have a landlord electrical safety certificate. But, should any electrical fittings or appliances within your rental property cause harm to a tenant you could be held liable. The tenant could sue you for damages and or worse you may be brought before a court for negligence under the regulations.
Manage your property well and the risks to you as landlord or agent are minimal, but manage it badly and your risks are high.
You are advised to make visual inspections yourself as landlord or agent in residential properties (record on a safety checklist) and have periodic checks carried out by a qualified electrician.
If you are in any doubt about the wiring or the safety of any appliances consult a qualified electrician.
In January 2005 new legislation under Part P of the Building Regulations make it a requirement that for certain types of electrical work in dwellings, plus garages, sheds, greenhouses and outbuildings comply with the standards. This means a competent electrician must carry out the work. For DIY electrical work you must belong to one of the Government's approved Competent Person Self-Certification schemes or submit a building notice to the local authority before doing the work.
Landlords, regardless of whether they see themselves as running a business or not, should make absolutely sure they are complying with these regulations to ensure that all electrical equipment supplied is safe.
Either, don't provide TVs, or
If you provide a TV in your rental premises and your tenants use it then you can both be held responsible for paying for a license! If the lease makes it clear that the tenant is responsible for buying the TV License then the landlord's risk is considerably reduced, though not entirely - ultimately both parties are open to prosecution.
Students are in the same position as any other tenant, if they have a TV set (or Computer which receives TV broadcasts) in their room and it is used they have to have a license. Their TV set is not covered by their parent's license as many might imagine.