Tenancy Deposit Protection
Introduction
Tenancy Deposit Protection (TDP) will add to the measures already brought in to drive up standards in the private rented sector set out in Housing Act 2004. Those measures include licensing multiple occupancy homes and new safety rules. TDP will apply to all assured shorthold tenancies (ASTs) in England and Wales, where a deposit is taken. Virtually all new contracts to let a property are ASTs. It started on 6 April 2007, and be valid for all new tenancy agreements from this date.
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 assist with the resolution 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.
Tenancy Deposit Protection in summary
• Landlords will be required to either join a statutory tenancy deposit scheme, if they take deposits, or give it to an agent who is part of a scheme.
• This will mean that deposits are safeguarded.
• Tenants will get all or part of their deposit back, if they have kept the property in good condition and are entitled to get their deposit back.
• The scheme offers alternative ways of resolving disputes which aims to be faster and cheaper than taking court action.
How does Tenancy Deposit Protection work?
There are two types of scheme: a single custodial scheme and two insurance-based schemes.
At Acre Estates we use an Insurance based Scheme with Tenancy Deposit Solutions.
Insurance-based schemes:
• The tenant pays the deposit to the Agent;
• The Agent retains the deposit on behalf of the Landlord. A premium is paid to the insurer – the key difference to the custodial scheme;
• Within 14 days of receiving a deposit, the Agent/landlord must give the tenant prescribed information (to be set out in secondary legislation) about the scheme being used;
• At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;
• If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
• If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.
Example: a tenant pays a deposit of £1000. At the end of the tenancy, the landlord says he wishes to keep £200 to pay for replacing damaged furniture. The remaining £800 will be returned to the tenant. The tenant disagrees, claiming the furniture was damaged when they moved in. Both agree to go to ADR, so the disputed £200 will be transferred to the scheme administrator until the dispute is settled.
Deposits must be returned within 10 days of the landlord and tenant agreeing how the deposit should be divided, or within 10 days following notification of an ADR/court decision.
Tenancy Deposit Solutions Ltd (TDSL) is a partnership between the National Landlords Association and Hamilton Fraser Insurance. The insurance-based tenancy deposit protection scheme is designed primarily to enable Agents to continue holding deposits.
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Penalties For Avoidance
If landlords do not protect their tenant’s deposits, they will be ordered (by the Courts) to repay three times the amount of the deposit to the tenant. |
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