As a Chelmsford landlord, it’s important to understand what happens to a tenant’s deposit when you decide to sell your rental property while the tenant is still living in it.
If the property is sold with the tenant in situ, the new landlord will need to consider how to deal with the tenancy deposit.
Both the current landlord and new owner are responsible for managing the continued protection of the deposit.
Under strict rules since 2019, security deposits in England need to be limited to either five weeks’ rent for tenancies with yearly rents under £50,000, or six weeks’ rent for rents above £50,000.
If a landlord chooses to sell a property and wants the tenant to leave, the landlord must return the deposit to the tenant within 10 days of the final deposit amount being agreed.
However, if the new landlord takes over the Chelmsford property with the tenant in-situ, the deposit will need to move to the new landlord, and it’s their responsibility to register the deposit for protection and serve the required prescribed information to the tenants.
Under an insured deposit scheme, the seller should agree to pass the deposit to the buyer, who will need to register the deposit for protection and show that it has been registered before passing it over. The new landlord must also inform the tenants where their deposit is protected and serve the required prescribed information.
In a custodial deposit scheme, the buyer will usually need to register an account, and the seller can then move the registration data to show under the buying landlord’s account.
In both situations, it’s recommended to formally amend the tenancy agreement with the new owner/landlord’s name as it is a material change.
It’s crucial to ensure that landlords understand their responsibilities in managing tenancy deposits to avoid any issues that may be costly later.
If you are a landlord buying a property with a sitting tenant or recently bought a buy-to-let property and you are not sure you are complaint, feel free to drop me a line on 01245 835859 for a no obligation chat.