Tenancy deposit schemes - know your options
Posted on: 09 December 2013
Landlords or letting agents who let out a property and take a deposit for an assured shorthold tenancy must join a government approved tenancy deposit scheme. These schemes are in place to ensure that tenants get their deposit back at the end of their tenancy agreement, providing they have adhered to the agreement terms.
Countrywide’s quarterly lettings index reported a 25% rise in the number of new tenants registering for rental accommodation in the third quarter of 2013 compared to 2012. That’s a lot of tenancy deposits that will potentially need protecting.
There are two types of tenancy deposit protection (TDP) schemes in the UK, offered by three providers. You must protect your tenants’ deposits if you rent out your home on an assured shorthold tenancy that started after 6 April 2007.
What’s the difference between them and how do you make sure you comply with the law?
As at October 2013, there are two types of tenancy deposit scheme – custodial tenancy and insurance-backed.
|What schemes are available||Custodial tenancy deposit scheme||Insurance-backed deposit scheme|
|What’s the difference between the schemes?||The money is put into the scheme at no cost to the landlord until two days after it is jointly instructed to release it by the landlord and the tenant. It is free because the administrative costs of managing it are paid for with the interest earned on the deposits.||For landlords preferring to keep their tenants’ deposits in their own bank account (thereby earning interest on them), insurance-backed schemes are available for a fee. Fees are either for annual membership or per deposit (the deposit value affects the fee).|
|Who offers them?||The custodial tenancy deposit scheme is only offered by theDeposit Protection Services (DPS)||The Deposit Protection Service, My Deposit and Tenancy Deposit Scheme all offer insurance-backed deposit schemes|
The landlords’ responsibilities
Since April 2012, landlords must put a tenant’s deposit in a scheme within 30 days of receiving it. They must tell their tenant the following information (also known as Prescribed Information):
- the address of the rented property
- how much deposit has been paid
- how the deposit is protected
- the name and contact details of the tenancy deposit protection (TDP)
- scheme and its dispute resolution service
- the landlord’s (or the letting agency’s) name and contact details
- the name and contact details of any third party that’s paid the deposit
- why the landlord would keep some or all of the deposit
- how the tenant can apply to get the deposit back
- what to do if the tenant can’t get hold of the landlord at the end of the tenancy
- what to do if there’s a dispute over the deposit
All the providers shown above help in the provision of this information, for example the DPS website shows a landlord’s checklist.
What happens if the landlord doesn’t meet their responsibilities?
If a landlord doesn’t protect his or her tenants’ deposit, the tenant can take legal action. If successful, the court can order the landlord to repay the deposit to the tenant or put it into a custodial TDP scheme within 14 days. The landlord may also have to pay his tenant a penalty of between one and three times the amount of the deposit within 14 days of a Court Order being obtained by the tenant.
What if there’s a dispute over the deposit?
All tenancy deposit schemes come with a free alternative dispute resolution service should there be an argument between the landlord and the tenant. This is a process of resolving disputes without going to court – which can be a lengthy and costly affair. An impartial and qualified adjudicator is appointed to look at the evidence of the dispute and help the two parties come to a binding decision.
Are your tenants’ deposits with Capita?
Capita Tenancy Deposit Protection mysteriously ceased trading on 14 September 2013. If deposits for tenancies finishing on or before 13 September 2014 are registered with Capita, they will still be protected. Legal services will be available from Capita until three months after a tenancy has ended. For tenancies ending on or after 14 September 2014, deposits held with Capita will need to be registered with one of the schemes shown above.
And finally, if you’d like to read up on the actual law covering tenancy deposit schemes, click here.
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