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What is a tenancy deposit scheme?

Thursday, 23 October 2014

Since 6th April 2007 it has been a legal requirement in England and Wales that landlords protect their tenants’ deposits. Disputes over withheld deposits are all too common, with latest figures showing that only 69% of deposits were returned in full during disputes which the scheme aims to alleviate. However, many landlords and tenants are still unaware of how exactly the scheme works and how it protects them. This article takes a look at some of the basics.

What is a deposit?

depositschemeWhen a tenant moves into a property they are asked, in most cases, to provide 4-6 weeks rent upfront as a guarantee against damage to the property, cleaning bills if the property is left in poor condition, unpaid bills and unpaid rent. It is payable upon signing a tenancy agreement.

What is a tenancy deposit scheme?

A tenancy deposit scheme is designed to safeguard tenants’ deposits by placing them in the hands of a third party. There are three tenancy deposit schemes that are backed by the UK government which are:

  • The Dispute Service (TDS)
  • Deposit Protection Service (DPS)
  • MyDeposits

How do they work?

Once a deposit is received from a tenant the landlord has 30 days in which to deposit it via an approved deposit scheme’s website. They must then provide the tenant with the following information:

  • The landlords name and contact details
  • The address of the tenancy
  • The amount of deposit paid
  • Details of which deposit protection scheme they are using
  • A copy of the certificate they have been given signed by the landlord
  • Details of how the tenant can get back their deposit when the tenancy ends
  • Details of how the tenant can raise a dispute with the Tenancy deposit scheme

What are the penalties?

Landlords who fail to place tenants’ deposits in an authorised scheme within 30 days of the commencement of a tenancy can be taken to court and could face a penalty of between one and three times the value of an initial deposit which is then given to the tenant.

What deductions can be made from a deposit?

It’s important that landlords provide their tenants with a detailed inventory (preferably with photographs) at the beginning of a tenancy as this can help prevent disputes over deductions made from a deposit at the end of a tenancy. In order for a landlord to make deductions they must be able to prove that they have incurred financial losses during the tenancy.

Landlords can make deductions, if reasonable, for damage to property, cleaning bills if the property is left in a poor condition and also for any unpaid rent or bills (gas, electricity, etc).

If there is a dispute over withholding parts of a deposit then a tenancy deposit scheme can help. Each scheme has an alternative dispute resolution service (ADR) who aim to resolve any issues before they go to court. If a dispute cannot be solved through an ADR or for whatever reason a deposit was not protected then you should seek legal advice from a specialist.

Click here for more information on the legal responsibilities of Landlords or speak to Rollingsons Property Litigation team who have significant experience in acting for both landlords and tenants in relation to property disputes.

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