The Rent Deposit Deed

It is usual for a Landlord to request a new tenant to provide a rent deposit at the start of a lease.

The rent deposit allows the landlord to be able to recover from the tenant any outstanding rent or other payments which the tenant has agreed to pay under the terms of the lease.

It is common for the landlord to have to carry out repairs to the property after a tenant has left the property at the end of the lease and has failed its repairing obligations. Here the landlord can recover the cost of the repairs from the Tenant’s rent deposit.

Where the landlord does recover costs from the rent deposit, this often leads to disagreement between the parties. It is therefore crucial that the Landlord has a well drafted Rent Deposit Deed drawn up which deals with the rent deposit in detail.

The Deed provides a written agreement whereby the tenant will pay to the landlord a sum of money which the landlord holds in a separate deposit account. The Deed refers to the Lease and allows the landlord to recover costs from the deposit account if the tenant defaults under the terms of the lease, and the tenant is then obliged to reinstate the deposit account to the full amount.

There is an option for the interest earned on the deposit to accrue and form part of the deposit and then to be returned to the tenant at the end of the lease (subject to the landlord having no claim).

It is important to note that if the tenant is a limited company then the tenant must register the rent deposit deed with Companies House within 21 days by submitting Form 395 with a copy of the Rent Deposit Deed and the relevant fee. Companies House will then note the details of the Rent Deposit Deed against the company and then return it to you.

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