Does the law require landlords to take a deposit from tenants?

I get asked this question surprisingly often, mainly from tenants (I think) although the questioners do not always identify themselves as being a landlord or a tenant.

Maybe it is because letting agents give the impression to tenants that it is the law, I don’t know.  But it isn’t.  

Deposits are optional for landlords

A landlord has not GOT to take a deposit from his tenants – and many landlords don’t.  Some landlords are so fed up with the bureaucracy and paperwork involved in taking a deposit that they would rather do without it.

For example, a builder landlord once told me that it was a lot simpler for him to just deal with any repair work himself without charging it to the tenants – which was easy for him as he was a builder.

Other landlords prefer to take extra care in choosing tenants and trust to the tenants leaving the property in good condition when they go – although it is often the larger landlords, who do this.  Probably because they are best placed to carry the loss if their property is left in a damaged condition.  

But deposits are not optional for tenants

However whether or not a deposit is taken is up to the landlord (not the tenant).  So although a landlord is not legally obliged to take a deposit, if he chooses to require a deposit (as most landlords do) then either the tenant pays the deposit or they can’t rent that property.  

So, sorry tenants, the fact that a landlord does not HAVE to take a deposit does not mean that you are legally entitled to demand to rent a property without paying one.  

It is up to the landlord (or his agents) who they choose to rent a property to.  So long as they are not discriminating unlawfully (for example by refusing to consider tenants on benefit) they can set whatever conditions they wish.  These can (and often do) include:

•  A requirement that the tenants pay a deposit
• A requirement that tenants submit to referencing (and sign the necessary letters of authority)
• A requirement the tenants provide their bank statements for the past three months

And so on.  

Look at it from the landlord’s point of view.  A property is an extremely valuable asset and tenants (some tenants) can do a huge amount of damage which can cost landlords thousands of pounds to repair. 

Once a tenant is in occupation it can take many months if not years to get them out if they prove to be unsuitable.  The requirements for a deposit, reference, access to bank statements etc are the landlords’ attempt to protect their position.

A tenant is fully entitled to refuse to agree to the landlord’s requirements.  But then the landlord is equally entitled to refuse to rent their property to them and to choose someone else.

Do landlords need to comply with the deposit scheme if no deposit is taken?

This rather bizarre question is another I get asked from time to time.  Just for the record – the answer is ‘no’.

If the landlord does not take a deposit – he does not have to join a tenancy deposit scheme – as he does not hold a deposit that requires protecting.

You cannot be forced to protect something which does not exist!