Deposits can become a frequent headache for property managers if they don't have a good management system. Deposits must be handled for almost every type of tenancy; it is a shared qualm for the industry, with a high risk of a property manager landing in legal hot water if they are not managed correctly.
Though handling deposits is a major source of stress for property managers, it doesn't have to be so painful. There are several things to consider when managing deposits that property managers should keep in mind to make their jobs easier.
Documentation is a property manager's friend. Detailed records of each deposit should include tenant information, the amount, and the date the deposit was received. Storing receipts and communication such as emails and phone logs is vital in simplifying a property manager's life, especially when the tenancy ends and they must retrieve all the information for returns.
Arthur's integration with Xero can help with this. Xero is an accounting package with an automated bank feed function that can be configured to encompass all aspects of a property company. It can also specifically be used to manage deposits.
An efficient system that automates these processes and keeps everything in one place can give property managers peace of mind. They don't have to worry about searching their records, unsure of whether the information has been stored in an organised way.
Property managers using Arthur and Xero can locate the holding deposits in the bank feed and manage them from there.
Ensuring deposits comply with local regulations is critical. In the UK, the deposit the tenant must pay at the start of their tenancy is capped. Total rent under £50,000 demands a maximum deposit of five weeks' rent, and over £50,000 requires six weeks' rent.
Deposits must be protected under a government-approved scheme. Property managers must ensure they comply with this measure as these schemes will either insure the money or hold it.
If a property manager does not comply with these rules, the matter can be taken to court if the tenant does not wish to negotiate. This can result in the property manager paying compensation of one to three times the deposit amount.
But what does a tenant's deposit cover? Discover in our blog.
Keeping up to date with deposit return deadlines is equally important because missing this deadline can put a property manager in legal trouble. The deposit return usually depends on the property's condition once tenants have vacated and whether the rent has been paid.
If there are any deductions, provide an itemised list of these. Detailed communication matters in this instance, as transparency helps to avoid misunderstandings and potential disputes.
This communication can be built over time rather than only becoming explicit at the end of a tenancy. Responding to tenant enquiries regarding the deposit process is the best way to keep tenants informed throughout their tenancy.