Flats & Houses

Tenacy Deposit Scheme: Landlords & Tenants Rental Deposit Scheme

What is the Tenancy Deposit Scheme?

When a landlord or letting agent takes a deposit from a tenant, the deposit must be protected in a government-authorised tenancy deposit scheme. The Tenancy Deposit Scheme (TDS) is aimed at ensuring tenants get all or part of their deposit back, when they are entitled to it.

Under the Scheme

• deposits will be protected during the tenancy
  
• deposits will be returned promptly at the end of the tenancy where there is no dispute
  
• any disputes between tenants and landlords or agents will be easier to resolve
  
• in the occurrence of a dispute the return of the deposit will be dealt with fairly by the Independent Complaints Examiner (ICE)
  
• tenants are encouraged to look after the property they are renting
  

When did the TDS come into force and what sort of tenancies will require deposit protection?

On the 6th April 2007 and applies to all new all Assured Shorthold Tenancies (AST) created after this date in England and Wales or any renewal thereof.

I am a Landlord, what are the legal implications of the TDS?

• You will be breaking the law if your tenant/'s deposit/s are not protected.
  
• You will be unable to regain possession of your property using notice-only grounds for possession under Section 21 of the Housing Act 1988.
  
• Your tenant can apply for a court order requiring their deposit to be protected if it isn't, or is entitled to request information to find out where it is being held.

If the court decides that you have failed to comply with the new rule or is not satisfied that the deposit is being held with an authorised scheme, the court can

• enforce the following:
  
• Order you to repay the deposit within 14 days of the issuing of the court order.
  
• Order you to pay the deposit into an authorised scheme.
  
• Order you pay the tenant three times the deposit amount within 14 days of the making of the order the tenant.

How does the TDS work?

• At the beginning of a new tenancy agreement, the tenant pays their deposit to their landlord or agent.
  
• The landlord or agent must then ensure it is protected.
  
• The Government has awarded contracts to three companies to run tenancy deposit protection schemes.
  
• Landlords and agents have a choice of three authorised scheme providers, offering two types of scheme to protect the deposit.
  

Custodial Schemes

There is one custodial scheme provider The Deposit Protection Service (DPS). The Landlord or agent does not retain the deposit but submits it to be protected by The DPS. There is no service charge because the scheme is funded from the interest earned from deposits held.

Insurance based Schemes

There are two insurance based schemes, the Tenancy Deposit Solutions (TDSL) and the Tenancy Deposit Scheme (TDS). The landlord can either directly or indirectly through agents hold the deposit through a scheme and pay a premium to the insurer.

What is the main difference between the Custodial Scheme and Insurance Scheme?

The custodial scheme does not offer protection in the event of a dispute. With an insurance based scheme 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.

I am a Landlord, what are my responsibilities to my tenants?

Within 14 days of receiving a deposit you 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
  

At the end of the tenancy depending on the type of scheme you are with will determine the steps to take at this stage. Generally if an agreement is reached about how the deposit should be divided, the landlord/agent or scheme will return the deposit to the tenant or divided in the way agreed by both parties within 10 days. In the event of the dispute there are several steps to take, (refer to section 'How are disputes handled').

How does legislation affect deposits on Assured Short hold Tenancy Agreements paid before the 6th April 2007?

• Legislation only applies to new deposits taken on or after 6th April 2007.
  
• Deposits taken before this date will not need to be protected except on renewal where paperwork is generated.

How Are Disputes Handled?

What are the time scales for returning the deposit to the tenant?

• The deposit must be returned within 10 days from the end of a tenancy less any agreed deductions from the landlord/agent.
  
• The tenant may complain to the Scheme after 10 days if their deposit hasn't been returned.

What happens if there is a dispute over the return of the deposit?

The Landlord/agent or tenant has the option to go to the impartial and evidence based service provided by the Alternative Dispute Resolution (ADR) attached to the Scheme. As this service is not compulsory both parties must agree to use the service and be bound by its decision. Should one or both of the parties not agree to use the service then a dispute can progress to court

Do the ADR charge for their services?

No, the ADR service is free of charge for both landlord/agent members and the tenant.

In the event of a dispute, what happens to the deposit and how is it refunded?

• For custodial schemes, the deposit in dispute will be held by the scheme until the ADR or court decides what a fair distribution is.
  
• For insurance schemes the Landlord/agent will be requested to transfer the amount in dispute to the scheme. No other funds need be transferred.
  
• Once a court or ADR decision is made, the either type of scheme will distribute the disputed amount in accordance with that decision.
  
• It generally takes about 29 days for a decision to be reached and communicated to all parties, if all had first agreed use the services of ADR.
  

Are inventories compulsory?

No, however, as disputes are evidence based, inventories and schedules of condition are a significant factor at the end of tenancy period. Therefore it is strongly suggested that an inventory is agreed to by your tenant.

The Tenancy Deposit scheme reflects the government increased recognition of the rights of tenants. Therefore, it is important as a Landlord you remain informed about how such legislation impacts you. At Paramount, we offer a full management and letting service. Our comprehensive service ensures not only a fair deal for tenants, but we also protect your interests as the Landlord.

Our professional industry body, The Association of Residential Letting Agents (ARLA), recommends The Tenancy Dispute Service as the preferred supplier to administer The Tenancy Deposit Scheme. By being part of this scheme, we are able to offer full protection to Landlords.

How can Paramount help me as a landlord who is not a member of a TDS

The Tenancy Deposit scheme reflects the government increased recognition of the rights of tenants. Therefore, it is important as a Landlord you remain informed about how such legislation impacts you. At Paramount, we offer a full management and letting service. Our comprehensive service ensures not only a fair deal for tenants, but we also protect your interests as the Landlord.

Our professional industry body, The Association of Residential Letting Agents (ARLA), recommends The Tenancy Dispute Service as the preferred supplier to administer The Tenancy Deposit Scheme. By being part of this scheme, we are able to offer full protection to Landlords.

Paramount Special Offer - We offer membership to an ARLA recommended Tenancy Deposit Scheme

We offer membership to an insurance based Tenancy Deposit Scheme. The Tenancy Deposit Scheme charge a fee for each tenancy per annum. Paramount will pass on this cost onto the landlord at the prevailing rate..

Find out more information about the Tenancy Deposit Scheme or our Letting and Management Service by contacting Spencer Lawrence, Director of Lettings at 020 7644 2332.