When a landlord or letting agent takes a deposit from a tenant for rents up to £100,000 per annum, the deposit must be protected in a government authorised tenancy deposit scheme. This rule only applies if the tenancy is an assured shorthold tenancy.
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Eventually all tenancy deposits will have to be registered in a tenancy deposit scheme. This includes deposits for existing as well as new tenancies. The scheme became operational on 2 July 2012 and different deadlines have been fixed for lodging deposits with a scheme, depending on when the tenancy agreement began.
If the tenancy started before 7 March 2011, the deposit must be registered either
There is currently no deposit protection scheme in place. Landlords do still have a responsibility to return the deposit (where one has been paid) if the property is in the same condition as when the tenant(s) moved in. Therefore, at the end of a tenancy or licence, the condition and contents of the property should be checked against the inventory made at the start of the tenancy and a decision made about how to handle the deposit.
At the start of a new tenancy agreement, the tenant pays their deposit to their landlord or agent as usual. The landlord or agent must then ensure it is protected by ensuring it is enrolled in a government-approved scheme. The landlord or agent must notify their tenants of the details of the scheme within 30 days of payment.
There are 2 types of scheme: custodial and insurance-based schemes.
Under this scheme, money is held by the scheme provider, rather than the landlord, until it is time for it to be repaid at the end of the tenancy. There is only one custodial scheme provider - The Deposit Protection Service. This scheme is free to use as it is funded entirely from the interest earned from deposits held. For more information, visit.
Custodial schemes work as follows:
1. The tenant pays the deposit to the landlord or agent
2. The landlord or agent then pays the deposit into the scheme
3. Within 30 days of receiving a deposit, the landlord or agent must give the tenant details about how their deposit is protected including:
If an agreement is reached about how the deposit should be divided at the end of the tenancy, the scheme will return the deposit in the manner agreed. However, if there is a dispute, the scheme will hold the deposit until the dispute resolution service or courts decide what should happen to it.
Meanwhile, until the matter is resolved, the interest accrued will be used to pay for the running of the scheme with any surplus going to the tenant or landlord, depending on who is entitled to the deposit.
Unlike the custodial scheme, under the insurance-based schemes the landlord keeps the deposit. There is a fee attached to these schemes to insure against the landlord failing to repay the tenant any money due to him/her. There are 2 insurance-based schemes:and the .
Insurance-based schemes work as follows:
1. The tenant pays the deposit to the landlord or agent
2. The landlord or agent keeps the deposit but it is insured by the scheme
3. Within 30 days of receiving a deposit, the landlord or agent must give the tenant the details of the tenancy deposit scheme including:
The landlord or agent should return all or some of the deposit (as agreed) within 10 working days of the end of the tenancy. However, 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.
Deposits must be paid into an approved scheme and the tenant(s) provided with information relating to the deposit, within 30 working days of the beginning of a tenancy. The three approved scheme providers are, and the .
The tenancy deposit scheme provider needs to be provided with contact details of the landlord and tenant as well as details of the tenancy and property. Similarly, the tenant will need to know the amount of the deposit and with which scheme provider the deposit has been registered. The circumstances in which all or part of the deposit can be kept at the end of the tenancy should also be explained, with reference to the terms of the tenancy agreement.
Landlords can apply for the return of the deposit as soon as is reasonably practicable after the tenancy has ended. Once the scheme provider receives the application they will contact the tenant to find out if they agree with the amount to be returned. The tenant should respond within 30 days, acknowledging that they agree with the figure or stating what figure they believe should instead be paid. If a tenant fails to respond within 30 days, the landlord will be paid any sum that they consider they were owed.
A free-to-access dispute resolution service will be offered by the tenancy deposit schemes. Landlords and tenants do not need to use this and are free to negotiate matters between themselves.
If a landlord requests to use dispute resolution, their tenant must also agree to do so. The tenant will have 30 days to respond to the request for dispute resolution. If the tenant fails to do so, the deposit will be repaid in line with the landlord's recommendation.
Disputes will be determined by an independent adjudicator. Once the adjudicator has come to a decision, they will notify the landlord, tenant and scheme provider. The scheme will then pay the deposit to each party after ten working days, subject to any review that may be requested by the landlord or tenant.
Decisions can only be reviewed once and only on the grounds that the adjudicator has made an error either in fact or in law. The adjudicator will then review their decision within five working days and inform the parties. This decision is final and cannot be reviewed.
If a landlord fails to use a tenancy deposit scheme, the tenant can apply to the sheriff court either during the tenancy or up to three months after it has come to an end. The court can order that the landlord pay the tenant up to three times the amount of the deposit and/or to meet the requirements of the tenancy deposit scheme regulations.