Deposit Protection Information
As part of the Housing Act 2004, the Government introduced tenancy deposit protection for all assured short hold tenancies (ASTs) in England and Wales where a deposit is taken.
The legislation ensures that tenants who have paid a deposit to a landlord or letting agent, and are entitled to receive all or part of it back at the end of the tenancy, actually do so.
Almost one out of every five tenants who had some or all of their deposit withheld felt it had been unjustifiably withheld. The new tenancy deposit protection schemes ensure all landlords safeguard the deposits they take, which is in every landlord and tenant's interests.
Who is affected?
The legislation covers almost all new AST contracts through which private landlords let property in England and Wales.
However, the following will not need to be registered with a tenancy deposit protection scheme:
- resident landlords (those living in the property)
- landlords of properties with rent of over £25,000 per annum - from 1st October 2010 this will increase to £100,000 per annum
- company lets
- student accommodation let directly by universities or colleges.
Deposits taken before 6 April 2007 do not need to be protected by a scheme such as The DPS. However, as an existing tenancy is renewed and a landlord agrees a new fixed-term tenancy, the initial deposit taken must then be lodged with a tenancy deposit protection scheme. From 1 October 2010, when the threshold will be increased to £100,000, any deposits taken on tenancies with an annual rent of under £100,000 per annum must also be protected.
More information on the requirements of the deposit protection schemes are available on the following web site, and landlords are strongly urged to familiarise themselves with their legal responsibilities.
There are three available schemes
1. www.depositprotection.com The Deposit Protection Service (The DPS) is open to all landlords and letting agents, and is the only scheme that is free to use.The service is funded entirely from the interest earned from deposits held. Landlords and Letting Agents will be able to register and make transactions online. Paper forms will also be available should internet access be an issue. The scheme will be supported by a dedicated call centre and an independent dispute resolution service.
2. http://www.mydeposits.co.uk Tenancy Deposit Solutions Ltd (TDSL) is a company jointly owned by the National Landlords Association and Hamilton Fraser Insurance (HFIS plc). TDSL is one of two organisations that have been awarded a contract by Communities & Local Government to operate an authorised insurance-based tenancy deposit protection scheme. The scheme will be sponsored by the NLA and administered by Hamilton Fraser Insurance, a company authorised and regulated by the Financial Services Authority. The scheme has been specifically designed to enable landlords to hold tenancy deposits throughout tenancies.
3. http://www.thedisputeservice.co.uk The Tenancy Deposit Scheme (TDS) TDS is an insurance-backed deposit protection and dispute resolution scheme run by The Dispute Service that builds on a scheme established in 2003 to provide dispute resolution and complaints handling for the lettings industry. The new scheme enables letting agents and landlords to hold deposits.
Deposits. Upon signing the tenancy agreement, the landlord or agent will take a dilapidations deposit from the tenant(s) in addition to any rents due. The purpose of the dilapidations deposit is to protect the Landlord against loss of rent or damage to the Property during the tenancy itself. This deposit will be kept in a separate and secure client account ready for refunding (less any charges due) at the end of the tenancy, or forwarded to the DPS Government regulated custodial deposit scheme (DPS).
Statutory Tenancy Deposit Protection. Where the tenancy is an assured shorthold tenancy, the Landlord or Agent is legally required to ensure that any tenancy deposit taken under the tenancy is protected within one of three statutory tenancy deposit schemes within 30 days of receipt. The schemes available are listed above.
Tenancy Deposit Information. Where statutory tenancy deposit protection applies to a tenancy deposit, the Landlord or Agent will provide to the tenant within 30 days the following information required from the Landlord by the Housing Act 2004:-
(a) Information on the particular scheme under which the tenancy deposit is protected
(b) Compliance by the Landlord with his obligations under the Act and
(c) Prescribed information for the tenant.
If a Landlord fails to comply with Tenancy Deposit Protection, there are two possible sanctions:-
a. Unable to use Section 21 notice
Currently, a landlord can serve two months' written notice in the prescribed form under Section 21 of Housing Act 1988 on a tenant in order to terminate a tenancy at the end of a fixed term, or after a fixed term has expired. If necessary, a landlord can obtain an order for possession of an AST in the County Courts under Section 21 of the Housing Act 1988. However, where a landlord fails to comply with Tenancy Deposit Protection, no Section 21 notice may be given in relation to the tenancy until such time as the legislation is complied with.
b. Payment to the Tenant
Tenants can make an application to a County Court under the Housing Act 2004 if they believe that their deposit is not being safeguarded, or where they have not been given the prescribed information about the scheme in which the deposit is safeguarded within 30 days of the landlord receiving the deposit.
Where the court is satisfied that the landlord has failed to comply with these requirements, or the deposit is not being held in an authorised scheme, the court may order the landlord to pay the tenant between one and three times the deposit amount.