You're a landlord/Agent letting out property in England and Wales, but are you taking damage deposits from your tenants in case they wreck the rental property or furnishing? If so, then you legally must protect your tenants' deposits using a tenancy deposit protection scheme.

There are two types of tenancy deposit scheme: either a custodial scheme or an insurance-based scheme. The government has awarded contracts to three companies to run its tenancy deposit schemes.

Are you aware?  if you do not place your tenants deposit in a scheme, and a dispute arises you will not be allowed to evict under the section 21 (housing act 2004) and your tenant will have the right to stay and it will cost the landlord a large fine.

What are Tenancy Deposit Schemes?                             LEGISLATIVE BACKGROUND

The schemes allow tenants to get all or part of their deposit back when they are entitled to it and encourage tenants and landlords to make a clear agreement from the start on the condition of the property.

The schemes:

allow tenants to get all or part of their deposit back when they are entitled to it

make any disputes easier to resolve

encourage tenants and landlords to make a clear agreement from the start on the condition of the property

There are two types of tenancy deposit protection scheme available for landlords and letting agents. All schemes provide a free dispute resolution service.

Insurance-based schemes

the tenant pays the deposit to the landlord

the landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme

Within 14 days of receiving a 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

At the end of the tenancy:

if an agreement is reached about how the deposit should be divided, the landlord or agent 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

Custodial schemes

the tenant pays the deposit to the landlord or agent
the landlord or agent then pays the deposit into the scheme

Within 14 days of receiving a 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

At the end of 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





The legislative background to Tenancy Deposit Protection

The requirements are set out in the Housing Act 2004 in sections 212 - 215 and Schedule 10 and came into effect on 6 April 2007.

Statutory Instruments relating to the implementation of the Tenancy Deposit Schemes and which apply to England and Wales were made, and published on 15 March 2007.  

Housing Act 2004

Tenancy Deposit Scheme Part 6 Chapter 4 (212 - 215) More info


LANDLORDS SHOULD TAKE NOTICE
214

(1) Proceedings relating to tenancy deposits .

Where a tenancy deposit has been paid in connection with a shorthold tenancy, the tenant or any relevant person (as defined by section 213(10) may make an application to a county court on the grounds— .

(a) that the initial requirements of an authorised scheme (see section 213(4) have not, or section 213(6)(a) has not, been complied with in relation to the deposit; or .

(b) that he has been notified by the landlord that a particular authorised scheme applies to the deposit but has been unable to obtain confirmation from the scheme administrator that the deposit is being held in accordance with the scheme. .

(2) Subsections (3) and (4) apply if on such an application the court— .

(a) is satisfied that those requirements have not, or section 213(6)(a) has not, been complied with in relation to the deposit, or .

(b) is not satisfied that the deposit is being held in accordance with an authorised scheme, .
as the case may be.

(3) The court must, as it thinks fit, either— .

(a) order the person who appears to the court to be holding the deposit to repay it to the applicant, or .

(b) order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme, .
within the period of 14 days beginning with the date of the making of the order.

(4) The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

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