A rent deposit deed is used when a landlord takes a rent deposit to provide a fund to cover any costs that a tenant may default on. Although it is called a rent deposit, it can be used to cover more than just rent and may be used to cover the costs of damages or other fees.
What is the purpose of the rent deposit deed?
The purpose of the deed is to ensure that the money remains the property of the tenant until such a time where it is needed by the landlord to cover any costs. This remains the case even if the sum is held in an account under the landlord’s name.
Having a rent deposit deed allows the deposit to be protected, preventing it from being claimed by a liquidator in the event of the tenant’s insolvency.
Registering the charge:
If the tenant in question is a company incorporated in England or Wales, the charge created by the rent deposit deed must be registered with Companies House within 21 days of its creation. For charges created before April 2013, this should be done using form MR01 and for charges after April 2013, form MG01.
LLPs registered in England and Wales under the Limited Liability Partnership Act 2000 should also register the charges and mortgages created with Companies House. For charges created before April 2013, this should be done using form LL MR03 and for charges after April 2013, form LL MG07.
Details of the rent deposit deed
To draft a rent deposit deed, your solicitor will need to know:
- Security of tenure
Is the lease excluded from the security of tenure provisions in the Landlord and Tenant Act 1954? If a property is protected by security of tenure and the lease comes to an end, if the tenant is still occupying the premises and using it for purposes of their business, the tenancy will continue unless one of the procedures under section 25-27 of the Landlord and Tenant Act 1954 is followed.
- Landlord’s details
The deed should include the capacity in which the landlord is entering into the rent deposit deed, be that as an individual, company, partnership or LLP. If it is an LLP or company, the company or registration number will have to be provided. If it is a partnership, the legal title must be help in the name of the partner(s) and not in the name of the partnership.
- Tenant’s details
The deed should include the capacity in which the tenant is entering into the licence, be that as an individual, company, partnership or LLP. If it is an LLP or company, the company or registration number will have to be provided. If it is a partnership, the legal title must be help in the name of the partner(s) and not in the name of the partnership.
- Date of the rent deposit deed
The deed should also include the date from which the deed will have legal effect. If this is not known, the date can be inserted on the top of the covering page on the day of completion.
If the tenant has a guarantor then their name and address will have to be provided to be included in the deed together with the capacity in which they are entering into the deed. Individuals may use their correspondence address and companies or LLPs can use their registered address.
- The deposit
The deed should state the following with regards to the deposit:
- The sum of the deposit
- The frequency of any interest that is to be paid
- The name of the bank and the name of the account holder in which the deposit is to be held
- Whether the tenant is required to maintain the balance should any amount of the deposit be used.