Tenant Deposit
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Tenancy deposit protection has been introduced to ensure that a tenant paying a deposit, who is entitled to get all or part of it back at the end of the tenancy, does so. The legislation assists with the prevention of disputes over deposits by encouraging landlords and tenants to have in place a clear agreement on the condition of the property from the start, and by employing third party involvement to ensure deposit protection.
To assist with the resolution of any disputes that do arise, an independent Alternative Dispute Resolution (ADR) service is being offered at no cost to landlord and tenant.
This service has been implemented so that having to go to the courts can be avoided, but it is not compulsory and court action can be taken if preferred. If a landlord and tenant agree to use the ADR service, they will also have agreed to be bound by its decision with no recourse to the courts.
Tenant deposit scheme protection is being upheld via two different types of schemes and a deposit can no longer be taken in respect of an AST unless it is to be protected by one of these.
Which scheme is used for deposit protection is your choice, not the tenants.
- Custodial Scheme
The tenant will pay the deposit to you as before and then this must be safeguarded within 14 days by paying the deposit in to the custodial scheme and by giving the tenant the appropriate information relating to this.
This type of scheme is free to use and is entirely funded by the surplus from interest generated on the pool of deposits.
At the end of the tenancy, if you and the tenant agree how the deposit should be apportioned then you are to inform the scheme which will return the deposit (plus interest) as has been agreed by both parties.
If you and the tenant can’t agree on the apportionment of the deposit, the disputed amount will remain in the scheme whilst the dispute is resolved. You and your tenant are to agree whether to use the scheme’s ADR service or one of you may decide to take the matter to the courts. The scheme will divide and return the disputed amount in accordance with the ADR service or court decision.
- Insurance-based Scheme
The tenant will pay the deposit to you as before and with an insurance-based scheme you can keep hold of this, but must safeguard it and give the tenant the appropriate information within 14 days.
To activate deposit protection you need to pay an insurance premium (set by the scheme administrator) for the deposit taken. This will ensure the return of the deposit (or part of it) to the tenant when he or she is entitled to it for any reason you fail to comply.
To use an insurance based scheme, you need to apply to become a member, for which there is a fee – used to fund the scheme. The service is free to tenants.
At the end of the tenancy, if you and the tenant agree how the deposit should be apportioned then you are to return all or some of it as has been agreed.
If there is a dispute, you must give the disputed amount to the scheme for safekeeping until the dispute is resolved, either through the ADR service or through the courts.
Your tenant pays you £1,000 as a deposit. At the end of the tenancy, you wish to retain £200 to pay for replacing damaged furniture. The remainder of the deposit (£800) has effectively been agreed to belong to the tenant and should be retuned to him/her immediately. If the tenant disagrees about the £200 you’ve withheld, perhaps claiming that the furniture was already damaged when he/she moved in, then you and your tenant can use the ADR service to resolve this matter and in the meantime, the disputed £200 must be given to or retained by the scheme administrator until the dispute is settled. |
The government has awarded contracts to three companies to run the tenant deposit schemes. One company, The Deposit Protection Service (The DPS), exclusively runs the custodial Scheme, whilst the other two companies: Tenancy Deposit Solutions Ltd (TDSL) and the Tenancy Deposit Scheme (TDS) are running the insurance-based scheme.
Custodial Scheme:
The Deposit Protection Service (The DPS)
This scheme is run by Comptershare Investor Services PLC, with the Chartered Institute of Arbitrators providing the ADR service. It is open to all landlords and letting agents.
For more information visit:
Insurance Based Schemes:
Tenancy Deposit Solutions Ltd (TDSL)
For more information visit
www.mydeposits.co.uk
The Tenancy Deposit Scheme (TDS)
This deposit protection and dispute resolution scheme is run by the Dispute Service Ltd. (an independent, not-for-profit company backed up by ARLA, the NAEA and RICS) and builds on existing voluntary programme providing dispute resolution and complaints handling for the lettings industry. It is directed primarily at letting agents.
For more information visit:
Return from Tenant Deposit Scheme to Buy to Let
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