Tenancy Deposit Scheme
Tenancy Deposit Protection (TDP) will add measures already brought in to drive up standards in the private rented sector set out in Housing Act 2004. Those measures include licensing multiple occupancy homes and new safety rules.
TDP will apply to all assured short hold tenancies (ASTs) in England and Wales, where a deposit is taken. Virtually all new contracts to let a property are ASTs.
The TDP will start on the 6th April 2007, and will be valid for all new tenancy agreements from this date.
Aims
There are two main aims of the scheme:
- To ensure good practice in deposit handling, so that when a tenant pays a deposit, and is entitled to get it back, they can be assured that this will happen.
- To assist with the resolution of disputes by having an alternative dispute resolution service (ADR). It will also encourage tenants and landlords to have in place, from the outset, clear agreement on the condition of the property through best practice, such as the use of inventories, and the agreement of the condition of the property.
How does the Tenancy Deposit Protection work?
Landlords will be able to choose between two types of scheme: a single custodial scheme and two insurance-based schemes.
Custodial scheme
- The tenant pays the deposit to the landlord;
- The landlord then pays the deposit into the scheme;
- Within 14 days of receiving a deposit, the landlord must give the tenant the prescribed information (to be set out in secondary legislation) about the scheme being used and the tenancy;
- At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;
- If there is a dispute, the scheme will hold the amount 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 landlord if the tenant isn't entitled to it.
Insurance-based schemes
- The tenant pays the deposit to the landlord;
- The landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme;
- Within 14 days of receiving a deposit, the landlord must give the tenant prescribed information (to be set out in secondary legislation) about the scheme being used and the tenancy;
- At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;
- If there is a dispute, 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.
I know this is a lot to take in guys, but I hope it will help some of your queries.
Kind regards,
Steve (welfare officer) x
If you would like any further information on TDP, go to the website - http://www.communities.gov.uk/tenancydeposit
- which will be updated as more information becomes available.
