Tenancy Deposit Protection
Tenancy Deposit Protection
By Tessa Shepperson, Solicitor
Are you a landlord renting out property to residential tenants? Are you looking to rent a property yourself? If so you need to be aware of the government scheme introduced in April 2007 to protect tenants' damage deposits.
When it applies
The rules apply to all deposits taken for Assured Shorthold Tenancies after 6 April 2007. Deposits taken before then will only need to be protected if a new tenancy agreement is given to the tenant after that date. A few tenancies will not come within the scheme, such as lettings with a rent of over £25,000, resident landlords, or company lets. When the scheme applies, the landlord must serve notice on the tenant with details of the scheme being used, using a special form, within 14 days of receiving the deposit.
The authorised schemes
There are three government authorised schemes (which are the only ones which can be used), and two types of scheme available. These are as follows:
Custodial scheme. This is where the landlord pays the deposit money to the scheme administrators, who then pay it out to the tenant or landlord as appropriate at the end of the tenancy. This scheme is free of charge. There is only one custodial scheme -
- The Deposit Protection Service Ltd who have a web-site at www.depositprotection.com .
Insurance based schemes. This is where the landlord is allowed to hold the deposit but has to pay a fee. The scheme administrators take out insurance so the deposit can be refunded to the tenant if the landlord defaults. There are two insurance based schemes:
- The Tenancy Deposit Scheme who have a web-site at www.thedisputeservice.co.uk. The organisers of this scheme, the Dispute Service Ltd, formerly ran a voluntary scheme for letting agents and this scheme is aimed mainly at agents.
- Tenancy Deposit Solutions Ltd who have a web-site at www.mydeposits.co.uk. This scheme is owned jointly by the National Landlords Association and Hamilton Fraser Insurance, and is aimed mainly at landlords.
Disputes
If the landlord and tenant cannot agree on the division of the deposit at the end of the tenancy, any undisputed element should be paid out as agreed, the disputed element must be paid to the scheme administrators for insurance based schemes, and the dispute will then be referred to arbitration. This is free of charge and the arbitrator will normally make a decision within 28 days of receiving the paperwork. The scheme administrators will pay the deposit (or the part of the deposit in dispute) out as appropriate within 10 days of receiving the arbitrators decision.
Penalties
If a relevant deposit is not protected, the tenant can go to court and ask for:
- The return or the deposit, or
- An order that the deposit be protected under the custodial scheme, and
- An order that the landlord pay the tenant a sum equal to three times the deposit amount, within 14 days
The landlord will also not be able to use the section 21 procedure for possession while the deposit is unprotected.
For more information on the schemes, see the schemes web-sites, listed above.
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Tessa Shepperson is editor of the popular online legal information service at www.landlordlaw.co.uk.