Do the Usual Rules Apply to Company Let Deposit Protection?

If you’re taking a company let deposit, then it’s important to note that the usual assured periodic tenancy deposit protection rules do not apply. A company let can seem like a normal tenancy, but the legal position changes because the agreement is not between the landlord and an individual tenant.

Instead, the agreement is between the landlord and a business. Company let deposit protection is one of those areas where landlords can get confused, especially if they are new to this type of tenancy.

Landlords do not need to treat company let deposit protection the same way they are legally required to for a standard residential tenancy deposit. However, the deposit still needs to be handled fairly and clearly, with the process outlined in the company let agreement. The wording of the agreement is important. This article will explain why you don’t usually need to use a deposit protection scheme, and it provides advice on what to include in the tenancy agreement regarding the deposit.

Does a Company Let Deposit Need to be Protected?

In most cases, a company let deposit does not need to be protected in a government-approved tenancy deposit scheme. As a landlord, there are circumstances where you are legally required to use a tenancy deposit scheme. They apply to assured periodic tenancies, which isn’t what a company let is. A company let is an agreement with the business. The occupier needs to be named, but they are not the legal tenant.

This does not mean landlords can be careless with the company let deposit. Landlords must make the agreement clear and follow it closely during and at the end of the term. Company let deposit protection is usually handled through the contract instead of the statutory deposit scheme rules.

What Should A Company Let Agreement Say About a Deposit?

Tenancy deposit agreements can be complex. Landlords need to set out clear terms in the agreement. It’s vital to include an explanation of how the company let deposit will be held, used, and returned. The agreement should also specify how the deposit may be used. Some of the areas that a deposit can be used for include:

• Unpaid rent
• Property damage
• Missing items
• Cleaning
• Utility liabilities
• Breach of agreement

Landlords will find it helpful to detail how they will assess whether or not it is fair to use the deposit. If a problem occurs, this will help avoid disputes. The agreement should state that any deposit deductions will be assessed against the inventory, check-in and check-out reports, photographs, and invoices for the work carried out.

Landlords should make a comprehensive property inventory to serve as a safety net and set out clear expectations for the condition of the property. It’s standard practice for landlords to only replace items on a like-for-like basis where possible.

The agreement should also state when the deposit will be reviewed after the company let ends. For example, the landlord may need time to inspect the property to confirm whether any repairs are needed. The landlord may then need to wait for a quote and make calculations.

Can a Landlord Organise Company Let Deposit Protection Anyway?

Even though it’s usually not mandatory to use a government-assured tenancy protection scheme, some landlords may still want some extra protection to provide peace of mind and reassurance. 

If you want to use a deposit scheme or alternative holding arrangement for a company let deposit, check whether the provider accepts that type of deposit, and make sure the agreement reflects how the money will be managed.

Note that standard government-approved custodial schemes generally do not accept corporate deposits. If you want third-party reassurance, you will typically need to look at specialised commercial escrow services or corporate stakeholder accounts.

Practical Tips To Avoid Disputes About Deposits

Even though landlords do not need to treat company let deposit protection the same way they are legally required to for a standard residential tenancy deposit, they must still handle the money fairly, set out clear terms in the agreement, and keep accurate records of any deductions made. Here are some tips to avoid any disputes around the deposit.

Keep a Clear Record of Everything

The property’s condition needs to be documented throughout. This includes making a detailed inventory, which includes photos before the tenancy even starts. This should then be updated throughout. Conduct a thorough inspection at the end and compare this to the inventory. This gives you hard evidence if you need to deduct from the deposit.

Keep Communication Open

It’s essential to keep a good relationship with the person you deal with at the company. This should also open communication between the two parties, which will build trust and reduce misunderstandings. If the company feels it can reach out to the landlord, it is more likely to report any damage during the tenancy rather than try to hide it.

Strong Understanding of the Tenancy Agreement

Both parties need a strong understanding of the deposit agreements. Anything left open or confusing could create loopholes or room for dispute. This will then inevitably lead to the process taking much longer than required.

If you’re looking for landlord insurance to help protect your property, then get in touch with our team for a quote today on 01788 818 670, or you can visit our advice centre for more information.