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Deposit protection scheme for landlords and tenants

Deposit Protection Scheme for Landlords

In your tenancy agreement, you would have described the method of rent payment and how much deposit will be held (and in which deposit protection scheme) until the end of the tenancy which could be used against payment for damage, dilapidations or losses.

Many Landlords in the private sector receive a deposit against possible non-payment of rent or damage to property. When a tenancy comes to an end, there is usually no disagreement about the return of the deposit. But sometimes there is, and this can cause much hardship and inconvenience to both Landlord and Tenant.

The Housing Act 2004 (Chapter 4, sections 212-5; & Schedule 10 – as amended by Section 184 of the Localism Act 2011) made provision for both the protection of tenancy deposits and the resolution of disputes over their return.

The Dispute Service has been awarded a contract by the Government to run one such scheme: The Tenancy Deposit Scheme (TDS).

The legislation came into effect on 6 April 2007. All deposits taken for Assured Shorthold Tenancies after that date must be covered by a tenancy deposit protection scheme.

Why do we have a Deposit Protection Scheme?

The Tenancy Deposit Scheme has been set up to service three principle objectives:

  1. Protect deposits throughout the tenancy
  2. Ensure the return of the deposit promptly at the end of the tenancy, where there is no dispute about the deposit
  3. Where there is a dispute about the deposit at the end of the tenancy, ensure it is dealt with fairly and quickly by the Independent Complaints Examiner (ICE)

Any deposit taken after 6th April 2012 must be protected in one of the 5 government approved schemes and within 30 days of taking the deposit from the Tenant.

In England, from the 1st of June 2019, a maximum of 5 weeks deposit is permitted.

The Deposit Protection Certificate and Prescribed Information for Tenants, provided by each scheme, must be given to the Tenant and any third party within 30 days of the deposit being received.

Failure to protect the deposit or to provide the correct information within 30 days will mean that the Tenant can apply to the Courts for the return of 100% of the deposit and up to 3 times the same amount in compensation.

A Section 21 Notice cannot be served until the deposit is protected and if this has not been done within the first 30 days it cannot be served at all unless the deposit is returned to the Tenant before Service of the Notice.

Each deposit protection scheme has its own rules and these too must be adhered to, failure to do so will attract the penalties listed above. There are two options the Landlord can hold the deposit and pay an insurance premium to cover the cost of arbitration in the case of a dispute or the deposit can be lodged with the custodial scheme at no cost and arbitration is paid for from the interest made on the monies lodged.

The amount of the deposit can be between one month rent to a maximum of 5 weeks (from 1st June 2019).  If more than this is taken it is considered to be a Premium and may change the terms of the Tenancy enabling a Tenant to sub-let the property without the Landlords consent. If the Landlord agrees to let to Tenants with pets you can ask for a pet insurance to be taken out by the Tenant and this will cover any damages caused by the pet.

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