Tenancy deposit schemes
Tenancy deposit schemes explained
How has the system changed?
From 6 April 2007 all new tenancy deposits must be protected in a government authorised scheme. This new rule applies if the tenancy is an assured shorthold tenancy.
Why has the system changed?
The Government wants to ensure that tenants deposits are protected so that they can get all or part of there deposits refunded when they are entitled to them. They want to make sure that any disputes between landlords and tenants are resolved more easily.
What options are available?
There are three options open to Landlords
The Deposit Protection Service (The DPS) - the only custodial deposit protection scheme is free to use and open to all Landlords and Letting Agents. The service is funded entirely from the interest earned from deposits held. Landlords and Letting Agents will be able to register and make transactions online. Paper forms will also be available should internet access be an issue. The scheme will be supported by a dedicated call centre and an independent dispute resolution service. For more information, visit the Deposit Protection Service website or call 0870 707 1707.
Tenancy Deposit Solutions Ltd (TDSL) is a partnership between the National Landlords Association and Hamilton Fraser Insurance. This insurance-based tenancy deposit protection scheme enables landlords, either directly or through agents, to hold deposits. Letting agents can also join the scheme. For more information, visit the Tenancy Deposit Solutions website.
The Tenancy Deposit Scheme (TDS) is an insurance-backed deposit protection and dispute resolution scheme run by The Dispute Service that builds on a scheme established in 2003 to provide dispute resolution and complaints handling for the lettings industry. The new scheme enables letting agents and landlords to hold deposits. For more information, visit the Tenancy Deposit Scheme website or call 0845 226 7837.
What sort of tenancies will deposit protection apply to?
All deposits taken by landlords in relation to assured shorthold tenacies (AST) - the most common form of new tenancy.
How will deposit protection work in practice?
The landlord – not the tenant – will have the option to choose whether to safeguard the deposit in the custodial or insurance-based scheme.
A landlord will have 14 days to safeguard a deposit from the day he receives it. The landlord will have to provide the tenant prescribed information about the scheme safeguarding the deposit within these 14 days.
To avoid disputes having to go to the courts, both schemes will be supported by an Alternative Dispute Resolution (ADR) service - although the use of this will not be compulsory.
When must deposits be paid back?
When the landlord and tenant agree how the deposit should be returned, in full or in part, it must be paid back within 10 days. In the custodial scheme: within ten days of the scheme being notified of agreement between the landlord and tenant. In the insurance-based scheme: within ten days of the tenant requesting that the landlord return his deposit. In case of a dispute: within ten days of the scheme being notified of the ADR decision.
What happens if a deposit has not been protected?
Currently, a landlord can obtain an order for possession of an AST at any point after the first six months of the tenancy providing any fixed term has expired and the landlord gives the tenant at least two months' written notice (Under Section 21 of the Housing Act 1988). This is known as ‘notice-only’.
However, under TDP, the landlord is unable to regain possession of the property using the usual 'notice only grounds', if the deposit has not been safeguarded and the prescribed information passed onto the tenant within 14 days of the landlord receiving it.
Tenants can apply for a court order requiring the deposit to be safeguarded or the prescribed information to be given to him about the scheme in which the deposit is safeguarded.
Where the court believes that the landlord has failed to comply with these requirements, or the deposit is not being held in an authorised scheme, the court must either order the landlord within 14 days of the making of the order to repay the deposit; or order the landlord to pay the deposit to the custodial scheme administrator.
The court must also order the landlord to pay to the tenant a fine of three times the deposit amount within 14 days of the making of the order.
This page was last updated on 14 October 2008
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