Tenancy Deposit Scheme
From 6 April 2007, when you pay a tenancy deposit for an assured shorthold tenancy, the landlord or letting agent must protect your deposit through a Government-backed tenancy deposit scheme. This is a legal requirement.
Why have the Tenancy Deposit Scheme been introduced?
The Government has introduced the scheme to protect tenancy deposits and provide a fairer system for settling disputes about the return of a deposit at the end of a tenancy. Before introduction of these schemes, there were many disputes about whether the landlord kept the dispute unfairly or not. With the this scheme, an independent service helps to resolve disputes about deposits at the end of a tenancy. This service is free for tenants.
What if I paid a deposit before 6 April 2007?
If the tenancy started before 6 April 2007, then the landlord is not required to protect the deposit by the scheme. However, if a new tenancy agreement was signed since that date, the deposit is recommended to be secured in a tenancy deposit scheme. In this case, the law does not specifically say that the landlord has to protect the deposit, but the Government has suggested that they should do so.
What does the landlord or agent have to do?
After a deposit has been paid, the landlord or agent must then protect your deposit using a tenancy deposit scheme. There are two types of scheme available:
- A custodial scheme, where the landlord or agent pays the deposit to the scheme, which will keep it until the end of your tenancy.
- An insurance scheme, where the landlord or agent keeps the deposit but pays insurance premiums to the scheme. This means that the deposit is insured if there is any dispute, and the scheme will repay the tenant the agreed amount directly. The insurance scheme can charge fees to landlords for membership and can require contributions towards the costs of insurance.
It will be up to the landlord or agent to decide what scheme to use. Certain information must be given to the tenant within 14 days of the day when the deposit was paid. This information includes:
- the landlord or agent’s contact details
- which tenancy deposit scheme is being used and the contact details for the scheme
- information about the purpose of a tenancy deposit
- how the tenant can apply to get the deposit back at the end of the tenancy
- what the tenant should do if there is a dispute about the deposit
What if the landlord or agent doesn’t provide the required information or hasn’t protected the tenant’s deposit?
In this case, the tenant can apply to the county court for an order that the landlord or agent should pay 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 compensation equivalent to three times the value of the deposit you paid.
What happens at the end of the tenancy?
At the end of the tenancy, if the landlord/letting agent agree on how much of the deposit should be returned, the tenant should get his/her deposit back within 10 days of agreeing.
If the deposit was held in a custodial scheme, the tenant will also receive some interest on the deposit. The custodial scheme will repay tenants direct, either by cheque or by electronic transfer. Deposits held in the insurance-based schemes will be repaid by the landlord either in cash or by cheque, as they choose. Deposits held in the insurance-based schemes will not pass on any interest to the tenant.
Government approved Deposit Schemes
- Tenancy Deposit Solutions Ltd(TDSL) – www.mydeposits.co.uk
- The tenancy Deposit Scheme (TDS) – www.td.gb.com