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The Tenancy Deposit Protection Scheme, introduced under the Housing Act 2004, is due to come into force on 6th April 2007. It will apply to all Assured Shorthold Tenancies in England and Wales where a deposit is taken, and means that for any tenancies starting on or after this date, where a deposit is taken, the tenant's deposit must be protected through the Tenant Deposit Protection Scheme.
If you have managing agents looking after your properties, they should know all about it and act accordingly. If, however, you manage your own tenancies, then the basic details are as follows:
Tenancy Deposit Protection in summary
- Landlords will be required to join a statutory tenancy deposit scheme, if they take deposits.
- This will mean that deposits are safeguarded.
- Tenants will get all or part of their deposit back, if they have kept the property in good condition and are entitled to get their deposit back.
- The scheme offers alternative ways of resolving disputes which aims to be faster and cheaper than taking court action.
Landlords will be able to choose between two types of scheme: a single custodial scheme and two insurance-based schemes.
Custodial scheme:
- The tenant pays the deposit to the landlord;
- The landlord then pays the deposit into the scheme;
- Within 14 days of receiving a deposit, the landlord must give the tenant the prescribed information (to be set out in secondary legislation) about the scheme being used;
- At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;
- If there is a dispute, the scheme will hold the disputed amount until the dispute resolution service or courts decide what is fair;
- The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant - or landlord if the tenant isn't entitled to it.
Insurance-based schemes:
- The tenant pays the deposit to the landlord;
- The landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme;
- Within 14 days of receiving a deposit, the landlord must give the tenant prescribed information (to be set out in secondary legislation) about the scheme being used;
- At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;
- If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
- If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.
Example: a tenant pays a deposit of £1000. At the end of the tenancy, the landlord says he wishes to keep £200 to pay for replacing damaged furniture. The remaining £800 will be returned to the tenant.
The tenant disagrees, claiming the furniture was damaged when they moved in. Both agree to go to ADR, so the disputed £200 will be transferred to the scheme administrator until the dispute is settled.
In each scheme, the deposit must be returned within 10 days of the landlord and tenant agreeing how the deposit should be divided, or within 10 days following notification of an ADR/court decision.
For further information, the following website gives details of the free service approved by the government:
www.depositprotection.com
Further information at:
www.mydeposits.co.uk
www.tds.gb.com
Viceroy Invest has no connection with any of these companies, whose names are provided simply as examples for further research.
www.viceroyinvest.com
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