Tenancy Deposit Protection Schemes
By law, landlords and agents taking a deposit on an
Assured Shorthold Tenancy (AST) that started on or after the 6
April 2007, must join a government sponsored tenancy protection
scheme.
Deposits: information
for landlords
Any landlord taking a deposit which they do not
protect by joining a scheme will be breaking the law. They will be
unable to regain possession of the property using notice-only
grounds for possession and will be liable to pay the tenant three
times the value of the deposit.
Protecting deposits made by a third party
If a tenant's deposit is paid by someone
else e.g. through a rent deposit scheme, you still must use a
TDP scheme. You should ask the tenant and third party what
relationship they are to each other and find out how much the third
party wants to be involved in the process. For example, the deposit
scheme administrator needs to know if the third party wants the
deposit returned directly to them.
Deposits: information for tenants
If you are a tenant, at the beginning of a new
tenancy agreement, pay your deposit to your landlord or agent as
usual. Within 14 days, the landlord or agent is required to give
you details about how your deposit is protected.
Aims of Tenancy Deposit Protection
There are two main aims:
- To ensure good practice in deposit handling, so that when a
tenant pays a deposit, and is entitled to get it back, they can be
assured that this will happen.
- To help with the settling of disputes by having an alternative
dispute resolution service (ADR). It will also encourage tenants
and landlords to have in place, from the outset, clear agreement on
the condition of the property through best practice, such as the
use of inventories, and agreement on the condition of the
property.
Types of scheme
There are two types of scheme:
- The custodial scheme under
which the landlord must handover deposits to the scheme operator.
This scheme is operated by The Deposit Protection Service.
- The insurance based scheme
which allows landlords or their agents to retain the deposit monies
until the tenancy ends. There are two operators for the insurance
based scheme: MyDeposits and Tenancy Deposit Scheme (TDS)
All tenant’s deposits must be protected by their
landlord or agent with one of these operators.
If your letting agent manages deposits and goes out of
business
Landlords are responsible for making sure the
deposit is kept safe with one of the schemes even if they use a
letting agent to look after the deposit.
The scheme provider will expect you as landlord
to pay it back any money it has to pay to the tenant if it is
unable to get the money from the managing agent. You should
therefore consider what arrangements your agent has made to keep
tenants’ money separate and available even if it goes out of
business.
Tenancies from before 6 April 2007
This only applies to tenancies
that are created from 6 April 2007. Tenancies started before this
date are not affected.
However, if a long-term
tenant signs a new assured short hold tenancy agreement after
6 April 2007 in the same property, they will be covered by Tenancy
Deposit Protection.
Tenants: if your deposit isn't protected
If your landlord or agent
hasn’t protected your deposit, you can apply to your local county
court. The court can order the landlord or agent to either repay
the deposit to you or to protect it in a scheme.
If your landlord or agent has
not protected your deposit, they will be ordered to repay three
times the amount of deposit to you.