Tenancy Deposit Scheme For Landlords
From 6 April 2007, when a tenant pays a deposit for an assured shorthold tenancy in England and Wales, the landlord or letting agent must protect your deposit through a Government-backed tenancy deposit scheme.
What is a Tenancy Deposit Scheme?
The scheme is a legislation requiring any deposit handed over to an agent or landlord to be secured into one of the three Government approved Tenancy deposit schemes.
Why was the Tenancy Deposit Scheme introduced?
Tenancy Deposit Protection schemes was introduced by the Housing Act 2004 as part of a package of measures to raise standards in the private rented sector. The legislation aims to ensure that tenants who have paid a deposit to a landlord or letting agent and are entitled to receive all or part of it back at the end of that tenancy, actually get it. In the past there have been a lot of disputes involving deposits between landlord and tenant. A lot of cases emerged where tenants thought their deposit was held unfairly, consequently the tenancy scheme was introduced.
Who does it apply to?
The scheme applies to EVERY landlord and letting agent in England and Wales where a deposit has been taken from a tenant under an Assured Shorthold Tenancy Agreement (AST), after the introduction date, 6th April 2007.
How does it work?
There are two types of tenancy deposit protection scheme available for landlords and letting agents, insurance-based schemes and custodial schemes.
Insurance Based Schemes
The tenant pays the deposit to the landlord and then the landlord retains the deposit and pays a premium to the insurer.
Custodial Schemes
The tenant pays the deposit to the landlord or agent and then the landlord or agent then pays the deposit into the scheme. This option is most commonly used by landlords.
Once the deposit is protected
The deposit must be protected within 14 days of receiving the deposit. The landlord or agent must give the tenant the details about how their deposit is protected including:
- the contact details of the tenancy deposit scheme selected
- the landlord or agent’s contact details
- how to apply for the release of the deposit
- information explaining the purpose of the deposit
- what to do if there is a dispute about the deposit
After the tenancy
If an agreement is reached about how the deposit should be divided, the scheme will return the deposit, divided in the way agreed by both parties. If there is a dispute, the scheme will hold the deposit until the dispute resolution service or courts decide what is fair
Is securing the deposit into a tenancy deposit scheme necessary?
- As long as the following is true, then yes, the deposit must legally be secured into a tenancy deposit scheme:
- The tenancy is an assured shorthold tenancy
- The agreement was formed on or after the 6th of April 2007
- A deposit was paid
- What do I do if my deposit hasn’t been protected?
- If tenant’s are concerned that their deposit hasn’t been protected, they can apply to the county court for an order that the landlord or agent should return the deposit back, or protect it in one of the tenancy deposit protection schemes.
- The court can also order the landlord or agent to pay you compensation equivalent to three times the value of the deposit you paid.
- Failing to protect the deposit may also make it more difficult for landlord’s to evict or repossess their property if the deposit isn’t protected.