January 20, 2011
Since 6 April 2007, Landlords who rent properties on an assured shorthold tenancy in England and Wales must protect the deposit they receive via a Tenancy Deposit Protection Scheme. The scheme was set up with the intention of safeguarding tenancy deposits and to provide alternative dispute resolution methods of resolving disputes in relation to deposits.
Types of scheme
There are currently two types of scheme, one custodial run by the Deposit Protection Service and two insurance-based schemes run respectively by Tenancy Deposit Solutions Limited and the Tenancy Deposit Scheme. In each case the tenant pays the deposit to the landlord. Under the former, the landlord then pays the deposit into the scheme, whereas under the latter the landlord will retain the deposit and pay a premium to the insurer. In each case within 14 days of receipt of the deposit the landlord must give the tenant certain prescribed information about the scheme being used and the tenancy and must sign a certificate which, amongst other things, includes confirmation that the information provided is accurate to the best of his knowledge.
Prescribed information
The main pieces of information to provide are:
(i) The contact details of the appointed scheme administrator together with information provided by the scheme administrator which explains the operation of the provisions of the scheme;
(ii) How the deposit may be paid or repaid to the tenant at the end of the tenancy;
(iii) What should happen where the landlord and the tenant dispute the amount of deposit to be repaid; and
(iv) General information such as the amount of the deposit paid and the address of the property.
End of the tenancy
Under the custodial scheme, 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 court decides what is fair. The deposit must be returned within 10 days of the scheme being notified of agreement between the landlord and tenant or notified of an ADR service/court decision.
Under the insurance-based schemes, the landlord returns any undisputed amount to the tenant. The disputed balance (if any) is then handed over to the scheme until the dispute is resolved. The deposit must either be paid back to the tenant (in full or in part) within 10 days of the tenant requesting the return of the deposit or, in the case of a dispute, of the scheme being notified of agreement between the landlord and tenant or notified of an ADR service/court decision. If the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.
Implications of failing to protect the deposit
If the landlord does not comply with the above requirements, he will be unable to regain possession of the property via a Section 21 Notice. Alternatively, a tenant can apply for a court order requiring the deposit to be safeguarded or the prescribed information to be given to him about the scheme in which the deposit is safeguarded.
Where the court believes that the landlord has failed to comply with the requirements, the court must either order the landlord within 14 days to repay the deposit or order the landlord to pay the deposit to the custodial scheme administrator. The court must also order the landlord to pay to the tenant a fine of three times the deposit.
For more information on this or other Landlord and Tenant issues, please contact Kyle Wyness at Spratt Endicott Solicitors on 01295 204135 or email Kyle at kwyness@se-law.co.uk.
