The key element in a property rental is the deposit. We take for granted that we have to pay a deposit at the start of the rental process – but do we know where that convention came from, or what it represents? And for that matter, who owns the deposit for duration of the rental? In this post, we’ll talk about the history of rental deposits and where Deposify sees them in the future.
Most of us have at some stage been party to a rental agreement – whether it was for a car, a tuxedo or a pair of shoes at the bowling alley. And the most common rental arrangement that we will nearly all encounter at some point in our lives is when renting a property.
The origins of rental deposits
The history of rental deposits is relatively modern and had its beginnings in legislation from the early 20th century relating to rent controls. In short, the law provided that a landlord was not allowed to require the payment of any sum in addition to the rent on the property from the tenant.
And so landlords sought to remain within the provisions of the law while at the same time protecting their interest in the property – meaning practices emerged in response such as charging fees for the furniture in a property.
Eventually, this evolved so that landlords and letting agents instead came to require deposits to be held in trust against damage and dilapidation – to incentivise tenants to maintain the property for the duration of the rental.
Whose deposit is it anyway?
It may be surprising to some that a rental deposit continues to be owned by the tenant throughout the rental, and is in effect treated as an escrow deposit held by the landlord on behalf of the tenant until the property is handed back in good condition.
The deposit shouldn’t be considered the property of the landlord; they are in a position only to make a claim on the deposit if there are grounds to do so. And the majority of rental disputes relate to cleaning, damages or the failure to pay rent.
It’s not a battle, it’s a partnership
Not every landlord and tenant relationship is terrible and ends in dispute over the deposit, but many do, and as a result, there are plenty of examples of lengthy and costly disputes over deposits not being returned, or parts of deposits being unfairly withheld without good reason.
And remember too, it’s not entirely one-sided. Many landlords have their own experience of properties being vacated in poor condition or tenants leaving without paying their last month’s rent, assuming that the deposit would cover it.
There is a balance and perspective needed in the relationship that isn’t always clear. A tenant is living in a property owned by the landlord, and equally, the deposit is not the landlord’s property to do with as they please. In other jurisdictions, such as some States in the US, the landlord has to pay interest to tenants on any deposits held to reflect it being their money.
Deposify: trust and security
Our aim at Deposify is to bring trust to the landlord and tenant relationship.
By using Deposify, landlords and tenants trust an independent third party to hold the deposit on their behalf. Deposify then lets landlords and tenants manage how and when the deposit is paid.
And if a dispute arises, Deposify has the tools for landlords and tenants to try and resolve disputes between themselves quickly, and if needed one of our independent adjudicators can resolve – all in a matter of days or weeks at most.
You can find out more about Deposify and get early access to the future of deposit management by signing up here.