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The Tenancy Deposit Protection Scheme.

Many landlords are asking: 'How does The Tenancy Deposit Protection Scheme affect me?'

 


What sort of tenancies will deposit protection apply to?

All deposits taken by landlords in relation to assured shorthold tenancies(AST) - the most common form of new tenancy - in England and Wales.

Aren't these provisions unfair on good landlords?

No. Most landlords deal fairly with tenancy deposits and are already acting responsibly by safeguarding deposits.

However, these provisions need to be put into place to ensure the minority of bad landlords to act responsibly by safeguarding tenancy deposits.

TDP puts into place a simple process for all landlords to ensure tenancy deposits are safeguarded. This is in the interests of both landlords and tenants.

How will deposit protection work in practice?

There are two types of scheme: a custodial scheme and two insurance-based schemes.

The landlord – not the tenant – will have the option to choose whether to safeguard the deposit in the custodial or insurance-based scheme.

A landlord will have 14 days to safeguard a deposit from the day he receives it. The landlord will have to provide the tenant prescribed information about the scheme safeguarding the deposit within these 14 days.

To avoid disputes having to go to the courts, both schemes will be supported by an Alternative Dispute Resolution (ADR) service - although the use of this will not be compulsory.

When must deposits be paid back?

When the landlord and tenant agree how the deposit should be returned, in full or in part, it must be paid back within 10 days.

In the custodial scheme:

within ten days of the scheme being notified of agreement between the landlord and tenant or notified of an ADR/court decision.

In the insurance-based scheme:

within ten days of the tenant requesting that the landlord return his deposit

In case of a dispute:

within ten days of the scheme being notified of the ADR service's, or court's, decision.

What happens if a deposit has not been protected?

a) Unable to use ‘notice only’

Currently, a landlord can obtain an order for possession of an AST at any point after the first six months of the tenancy providing any fixed term has expired and the landlord gives the tenant at least two months' written notice (Under Section 21 of the Housing Act 1988). This is known as ‘notice-only’.

However, under TDP, the landlord is unable to regain possession of the property using the usual 'notice only grounds', if the deposit has not been safeguarded and the prescribed information passed onto the tenant within 14 days of the landlord receiving it.

b) Fine

Tenants can apply for a court order requiring the deposit to be safeguarded or the prescribed information to be given to him about the scheme in which the deposit is safeguarded.

Where the court believes that the landlord has failed to comply with these requirements, or the deposit is not being held in an authorised scheme, the court must either order the landlord within 14 days of the making of the order to repay the deposit; or order the landlord to pay the deposit to the custodial scheme administrator.

The court must also order the landlord to pay to the tenant a fine of three times the deposit amount within 14 days of the making of the order.

The reality is that if you rent property out you will need to subscribe to one of the three approved government deposit protection schemes.

A thorough, detailed, accurate and unbiased inventory will now be vital in the event of a landlord wanting to claim against a tenant’s deposit. Lawrence Greenberg, Chief Executive of the Dispute Service Ltd (who have been awarded one of the new contracts and will also be running the dispute resolution service for that contract) was recently quoted in Agreement (ARLA magazine) as saying that whilst inventories are not a legal requirement, without one, and a good one at that, you may as well not bother even taking a deposit!

As one of the scheme providers recorded that about 20% of tenancies resulted in a dispute, it is important that landlords and tenants have a clear, quick and efficient way ofdealing with the deposit at the end of their tenancy.

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