Tenancy Deposit Protection Schemes - advice for Landlords
All deposits taken for an Assured Shorthold Tenancy (ASTs) in England and Wales must be protected by a tenancy deposit protection scheme.
This came into place on 6th April 2007 and is applicable whether the deposit is taken by a landlord or letting agent.
The two types of scheme
There are two types of tenancy deposit protection scheme available for landlords and letting agents:
1) insurance-based schemes - under insurance-based schemes the tenant pays the deposit to the landlord, who retains it and pays a premium to the insurer.
2) custodial schemes - under custodial schemes the tenant pays the deposit to the landlord or agent and the landlord or agent then pays the deposit into the scheme.
Government backed schemes
The following are government-backed tenancy deposit protection (TDP) schemes:
Deposit Protection Service (Custodial and Insured)
Tenancy Deposit Scheme
Capita Tenancy Deposit Protection
The schemes are intended to:
allow tenants to get all or part of their deposit back when they are entitled to it and make any disputes easier to resolve
encourage tenants and landlords to make a clear agreement from the start on the condition of the property
The schemes are required to provide a free dispute resolution service.
Within 30 days of receiving a deposit the landlord or agent must put the deposit into the scheme. They must also give the tenant details about how their deposit is protected.
At the end of the tenancy
At the end of the tenancy, if an agreement is reached about how the deposit should be divided, the tenant will be refunded all or some of the deposit within 10 days of the tenancy ending.
If there is a dispute, the deposit is protected in the TDP until the issue is resolved.
Under an insurance based scheme (1), 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
Under a custodial scheme (2) the deposit will be retained in the scheme until the dispute resolution service or courts decide what is fair.
The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant; or the landlord if the tenant isn't entitled to it.
If the landlord fails to comply, an application can be made to the court and possession can be barred.
A holding deposit is money paid by a prospective tenant to hold a property before an agreement is signed.
Landlords do not have to protect a holding deposit However, once the tenancy is finalised, the holding deposit becomes a deposit, which then must be protected.
Deposits made by a third party
Landlords must use a TDP scheme even if the deposit is paid by someone other than the tenant themselves, such as a rent deposit scheme or their parents.
Information for tenants
If you are a tenant and have an issue with your landlord or deposit, our article, Tenancy Deposit Protection Schemes for Tenants will help.
Need more help and advice?
Whether you are a landlord or a tenant, you can get more help and advice from our team of solicitors who have expert knowledge of all landlord and tenant issues.
Call our solicitors at Wallace Robinson & Morgan on 0121 705 7571 or email firstname.lastname@example.org.
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