Deposits

It is common practice for a landlord to request a deposit from a tenant which is held throughout the tenancy and returned to the tenant at the end of the tenancy less any deductions for damage. This acts a security to the landlord that any damage can be claimed against the deposit.

Deposits will usually cover:

  • stolen items

  • outstanding debts attached to the property

  • damaged items

  • cleaning of the property

  • non-payment of rent

A deposit will not normally cover wear and tear and an allowance for an element of this should be made. A property cannot be expected to be returned in the exactly the same condition after a two year tenancy for example. It is important that a detailed inventory is carried out, for more information on inventories click here

Over the years there have been many problems with deposits and some landlords have unreasonably withheld them from tenants. This has resulted in the Tenancy Deposit Protection Scheme.

Tenancy Deposit Schemes

What is the Tenancy Deposit Scheme?

The Housing Act 2004 introduced Tenancy Deposit Protection as a way of raising the standards within the Private Rented Sector.

From 6th April 2007 all deposits taken by landlords in respect of Assured Shorthold Tenancies (AST) in England and Wales must be safeguarded by one of three Government schemes. Landlords can choose which scheme they wish to use and must safeguard each deposit and inform the tenant which scheme has been used within 14 days of receiving the deposit. The legislation requires that the landlord is responsible for ensuring that any deposit taken is protected and that the statutory requirements of tenancy deposit protection are met.

Deposits taken before 6 April 2007 do not need to be protected by a scheme. However, as an existing tenancy is renewed and a landlord agrees a new fixed-term tenancy, the initial deposit taken must be lodged with a tenancy deposit scheme.

The two main aims are:

  • To ensure good practice in deposit handling, so that when a tenant pays a deposit, and is entitled to get it back, he or she can be assured that this will happen

  • To assist with the resolution of disputes by an alternative dispute resolution (ADR) service. It also encourages tenants and landlords to agree at the beginning of the tenancy, the condition and contents of the property.

What are the three government approved schemes?

The Deposit Protection Service

The Deposit Protection Service is the Government approved custodial tenancy deposit protection scheme. The DPS is the only custodial deposit protection scheme, is free to use and open to all agents/landlords. This means that landlords are required to hand over the deposit to be held by an independent third party. The service is funded entirely from the interest earned from deposits held. Agents/landlords can register and make transactions online, but paper forms are also available.

www.depositprotection.com or call 0870 707 1707

MyDeposit (previously Tenancy Deposit Solutions Ltd)

MyDeposit is an insurance-based scheme jointly owned by the National Landlords Association and Hamilton Fraser Insurance which allows landlords to retain the deposit but are required to pay for insurance.

www.mydeposits.co.uk or call 0871 703 0552

Tenancy Deposit Scheme

The Tenancy Deposit Scheme is run by The Disputes Service. The Dispute Service is an independent, not-for-profit company established in 2003 to resolve complaints and disputes arising in the private rented sector speedily, cost-effectively and fairly.

As well as running the Tenancy Deposit Scheme, the company deals with complaints against members of The Association of Residential Letting Agents (ARLA).

The Dispute Service also runs a similar scheme, under the auspices of the Ombudsman for Estate Agents, for its members who undertake lettings.

www.thedisputeservice.co.uk or call 0845 226 7837