Overview
The Tenants' Deposit Protection Scheme was introduced as part of the Housing Act 2004 with the aim of protecting the unnecessary retention of tenant's deposits by unscrupulous landlords.
Prior to this scheme, tenants had no safeguards to protect their deposits. In the event of a dispute with a landlord, no independent arbitrator was available. The landlord generally decided how much, if any amount. of a deposit was returned to the tenant.
From 6 April, 2007, an authorised tenancy protections scheme has protected all deposits for property with a rent up to £25,000 a year held by landlords or their letting agents for Assured Shorthold Tenancies (AST) in england and Wales.
In Scotland, no deposit protection scheme is in force, but one is planned as part of a new Scottish Housing Act.
What's covered by the scheme?
The rules cover all AST agreements except:
- Resident landlords
- Properties with rents over £25,000 per years
- Company lets
- Student accommodation let by universities or colleges
- Deposits taken prior to 6 April, 2007
Taking a deposit
Landlords can choose which scheme to opt for, but they must inform the tenant within 14 days of taking a deposit which scheme they are using. The landlord's notice must specify:
- Contact details of the protection scheme
- Contact details for the landlord
- How to apply for the release of the deposit
- Information explaining why a deposit is required
- What to do if there is a dispute about the deposit
The protection schemes
The three protection schemes are:
- Deposit Protection Scheme (DPS)
A free, online service funded by the interest generated by money on deposit. No membership fees and deposits are accessible 24/7. Disputes are referred to the Alternative Dispute Resolution Service (ADR), run by the Chartered Institute of Arbitrators.
- myDeposit
An insurance-backed scheme owned by the National Landlords Association and an insurance company. Landlords or their agents hold the deposits. Landlords pay a joining fee, an annual renewal fee and an insurance premium for each deposit. Disputes go to the ADR.
- Tenancy Deposit Scheme (TDS)
Another insurance-backed deposit protection and resolution service. Landlords or agents hold the deposits. An annual fee per property is paid in to the scheme.
What if a deposit is not protected?
If a landlord fails to protect a deposit or does not inform the tenant of the scheme details within the 14 day period, the tenant can apply to a county court and request:
- Repayment of the deposit with 14 days
or
- An order for the landlord to pay the deposit in to a designated account held by one of the three protection schemes.
The court can also order the landlord to pay a penalty of up to three times the deposit within 14 days for failing to meet his legal obligations.
Failure to supply the required information or to protect a deposit also restricts the landlord's rights to evict a tenant.
Generally, the AST agreement gives landlords power to give a tenant two month's notice to quit. If the tenant fails to quit, then the landlord can apply to a county court for an eviction order.
If the landlord is in breach of the deposit protection rules, they cannot issue the notice to quit.
End of a tenancy
When a tenancy ends, the landlord should return the deposit in full unless they have a good reason to retain any of the money.
The tenant is entitled to interest on the deposit if it has been held in an interest-bearing account.
If the landlord keeps any of the deposit, he must show a good reason why, like reclaiming rent arrears or to pay for damage over and above normal wear and tear.
If the tenant disputes the retention, the dispute goes to arbitration which is binding on both sides. If the landlord is holding the deposit, he should hand the money to a protection scheme for safe-keeping pending resolution of the dispute.
If no resolution is agreed, the matter can be taken to county court by either side.
If the landlord fails to return the deposit, the protection scheme will repay the tenant and seek redress from the landlord. |
