This is the date when new rules for taking and holding tenant’s deposits come into force.
Failure to comply can both affect your right to regain possession AND lead to an order for the deposit to be paid into a scheme or to the tenant AND a fine, payable to the tenant, of up to three times the amount of the deposit.
Disputes over retentions at the end of a tenancy will go to arbitration and certain documents MUST be attached to the landlord’s claim meaning that the correct documentation MUST be in place at the beginning of the tenancy.
The new rules ONLY affect Assured Shorthold Tenancies in England and Wales created after 6 April 2007 – a renewal after 6 April 2007 of an existing tenancy will be affected by a ‘holding over’ to create a periodic tenancy will not.
The new rules do not apply to –
• Resident landlords – those living in the property with the tenant
• Landlords of properties where the rent is over £25,000 a year
• Company lets
• Student accommodation let directly by universities or colleges
If you as a landlord take and/or hold a deposit from a tenant you must belong to a tenancy deposit protection scheme. If your letting agent takes and /or holds such a deposit on your behalf that agent must register with such a scheme.
There are two types of scheme –
1. A custodial scheme where the deposit is paid to the custodian; or
2. An insurance backed scheme where the agent/landlord holds the deposit.
There are two approved insurance backed schemes to choose from –
1. Tenancy Deposit Solutions Limited – a scheme run by the National Landlords Association and Hamilton Fraser Insurance; and
2. The Tenancy Deposit Scheme run by The Dispute Service.
The custodial scheme is free; the insurance schemes are not.
The custodian scheme, The Deposit Protection Service (DPS) with a website at www.depositprotection.com, is run by a company that has done the same in Australia for the last eight years. DPS is to be funded by the interest earned on the deposits.
There are no preconditions or assessments for membership and it is open to letting agents and landlords alike.
The scheme will have
• an on-line facility for registering, making deposits, transfers and repayments
• a help line manned during office hours
• an independent ADR scheme run by the Chartered Institute of Arbitrators (CIA) to resolve disputes over refunding deposits.
Put simply the custodian scheme procedure is –
• Tenant pays deposit to landlord or letting agent
• Deposit paid to DPS within 14 days of receipt
• Prescribed information given to tenant also within 14 days of receipt of deposit
• DPS provides confirmation of receipt and details of scheme to landlord and to tenant
• At end of tenancy if landlord and tenant agree on repayment of deposit the scheme is advised and the deposit divided as agreed and paid out within 10 days
• In event of a dispute, any undisputed amount is returned to the tenant and the balance continues to be held until a decision of ADR or court proceedings is reached
For insurance-based schemes the procedure is slightly different-
• Tenant pays deposit to landlord or letting agent
• Landlord retains the deposit and pays premium to insurer
• Prescribed information given to tenant within 14 days of receipt of deposit
• At end of tenancy, if the landlord and tenant agree on how the deposit should be divided the landlord returns the agreed sum to the tenant
• In event of a dispute, any undisputed amount is returned to the tenant and the balance is handed over to the scheme for safe keeping until a decision of ADR or court proceedings is reached
If the landlord fails or refuses to comply, the insurance arrangements come into play to ensure that the tenant receives back the deposit or that part of it to which he or she is entitled.
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