#AskTDS: "What happens to deposits if I buy/sell a tenanted property?"

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This article has been written in response to a landlord’s query: “What happens to deposits if I buy/sell a tenanted property?”

There are many reasons why a landlord may decide to sell their property while a tenant is still living in it - but it is important to understand how that affects the tenants’ deposit(s).

If a property is sold with tenants remaining, they are described as ‘tenants in situ’. It’s the responsibility of both the current landlord and the buyer to manage what happens with the deposit to ensure that it remains protected.

In England and Wales there are both Insured and Custodial schemes to protect tenancy deposits and they both work slightly differently in the case of tenants in situ. 

So, how does this work under the Insured scheme?

As part of the sale, the seller should agree to pass the deposit to the buyer who will need to re-protect it with TDS Insured. The original registration may not be transferable between the old and new owners. 

Best practice in this case is for the buyer and seller to discuss the deposit so that it is part of the sale transaction. To comply with the requirements of the tenancy deposit protection (TDP) legislation they must re-serve the prescribed information (that’s the specific information regarding the protection of their deposit that the Housing Act 2004 requires landlords and agents to give to tenants including the TDP scheme leaflet).

What about under the Custodial scheme?

Under the TDS Custodial scheme, the buyer will need to register an account and the seller should instruct the scheme to transfer it into the buyer’s deposit account. The new landlord would create an account, give the seller their account number and then the deposit can be transferred from user to user. The prescribed information should also be re-issued. 

In both the Insured and Custodial situations, it would also be good practice to amend the tenancy agreement with the new owner/landlord’s name as it is a material change.

If there is a change in circumstances like rent or deposit increase, and a property is being sold with a tenant in situ, landlords should notify TDS. We have straightforward processes in place for dealing with these changes.


About the author:

John King is a former practitioner in the lettings industry with over 25 years’ experience with a keen understanding of the Private Rental Sector. In addition to his work in estate agency, John has worked within tenancy deposit protection since 2009 starting in the adjudication team before moving into customer services and has recently moved from Deputy Director to Director in our key customer facing team.

John has presented training seminars, forums and industry events and has been involved in the successful TDS Academy training programme offered throughout England and Wales and operates a team of customer service advisors to assist with customer enquiries.

Advocating improvement through education and understanding John appreciates the ups and downs of a tenancy transaction experienced by all the parties. He brings knowledge, consideration and practicality to encourage the stakeholders involved to seek an acceptable solution to tenancy deposit disagreements and access Alternative Dispute Resolution where required.


About TDS:

Tenancy Deposit Scheme (TDS) is a government approved scheme for the protection of tenancy deposits; TDS offers both Insured and Custodial protection and also provides fair adjudication for disputes that arise over the tenancy deposits that we protect.

We provide invaluable training in tenancy deposit protection and disputes for agents and landlords through the TDS Academy as well as joining with MOL to provide the Technical Award in Residential Tenancy Deposits.

TDS Insured Scheme: where a TDS member can hold the tenancy deposits as stakeholder during the term of the tenancy.

TDS Custodial Scheme: where TDS hold the deposit for the duration of the tenancy.

TDS Academy: TDS provides property professionals with invaluable training in tenancy deposit protection and tenancy deposit disputes.

TDS can only comment on the process for our scheme, other deposit protection schemes may have a different process/require different steps. Content is correct at the time of writing.

These views are those of the author alone and do not necessarily reflect the view of TDS, its officers and employees.

Posted by John King on 18 May 2018

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