Many landlords are asking: How does Tenancy Deposit Protection affect me?
Landlords and letting agents
Communities and Local Government is working closely with landlord and letting agent representative organisations to ensure that information will be readily available to landlords and letting agents about Tenancy Deposit Protection (TDP) from April 2007.
What sort of tenancies will deposit protection apply to?
All deposits taken by landlords in relation to assured shorthold tenancies(AST) - the most common form of new tenancy - in England and Wales.
What is the average deposit for an assured shorthold tenancy in England?
The most recent Survey of English Housing (05/06) found that the average deposit for an AST in England is £695.
Aren't these provisions unfair on good landlords?
No. Most landlords deal fairly with tenancy deposits and are already acting responsibly by safeguarding deposits. However, these provisions need to be put into place to ensure the minority of bad landlords to act responsibly by safeguarding tenancy deposits.
TDP puts into place a simple process for all landlords to ensure tenancy deposits are safeguarded. This is in the interests of both landlords and tenants.
How will deposit protection work in practice?
There are two types of scheme: a custodial scheme and two insurance-based schemes.
The landlord – not the tenant – will have the option to choose whether to safeguard the deposit in the custodial or insurance-based scheme.
A landlord will have 14 days to safeguard a deposit from the day he receives it. The landlord will have to provide the tenant prescribed information about the scheme safeguarding the deposit within these 14 days.
To avoid disputes having to go to the courts, both schemes will be supported by an Alternative Dispute Resolution (ADR) service - although the use of this will not be compulsory.
When must deposits be paid back?
When the landlord and tenant agree how the deposit should be returned, in full or in part, it must be paid back within 10 days.
In the custodial scheme: within ten days of the scheme being notified of agreement between the landlord and tenant or notified of an ADR/court decision.
In the insurance-based scheme: within ten days of the tenant requesting that the landlord return his deposit
In case of a dispute: within ten days of the scheme being notified of the ADR service's, or court's, decision.
Can't it be paid back before then - i.e. on the last day of the tenancy?
Yes. Ten days is the maximum. In practice, Communities and Local Government would like to see deposits returned more quickly and will be working with scheme administrators to see how this can best be achieved.
Many landlords currently pay the deposit back on the last day of the tenancy. In the insurance-based scheme, if the landlord and tenant agree on the amount to be returned, the deposit can be returned on the last day of the tenancy.
What happens if a deposit has not been protected?
a) Unable to use ‘notice only’
Currently, a landlord can obtain an order for possession of an AST at any point after the first six months of the tenancy providing any fixed term has expired and the landlord gives the tenant at least two months' written notice (Under Section 21 of the Housing Act 1988). This is known as ‘notice-only’.
However, under TDP, the landlord is unable to regain possession of the property using the usual 'notice only grounds', if the deposit has not been safeguarded and the prescribed information passed onto the tenant within 14 days of the landlord receiving it.
b) Fine
Tenants 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 these requirements, or the deposit is not being held in an authorised scheme, the court must either order the landlord within 14 days of the making of the order 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 amount within 14 days of the making of the order.
Tenants
Communities and Local Government is working closely with Shelter and the Citizen’s Advice Bureau to ensure that information will be readily available to tenants about Tenancy Deposit Protection from April 2007.
Why should the Government protect tenants' deposits?
So that, when a tenant pays a deposit, and he or she is entitled to get all or part of it back, the tenant can be assured that this will happen.
How can tenants find out if their deposit is protected after 6 April 2007?
Within 14 days of receiving a deposit, landlords will have to provide tenants will details of which scheme is protecting the deposit. The scheme will be able to confirm if the deposit is protected.
What if a tenant moves out of their home before realising that their deposit hasn't been protected?
The tenant will need to apply for a court order and the court will order the landlord to repay the deposit amount to the tenant.
In order to avoid this situation, tenants should make sure that their landlord has given them the prescribed information relating to the scheme that is safeguarding their deposit, and check that the deposit is safeguarded, within 14 days of paying the deposit.
How will this affect deposits paid for ASTs which start before 6 April 2007?
The legislation will only apply to new deposits paid for ASTs entered into on or after 6 April 2007. Any deposit paid before this date will not need to be safeguarded by a tenancy deposit scheme.
What happens if the tenant renews their contract after 6 April 2007?
If the tenant decides to remain in their existing rented property beyond the initial fixed term of six months, how the deposit is treated will depend on how the tenancy is continued:
Periodic tenancy - i.e. the tenancy continues with no new agreement – TDP will not apply, as no new AST will have been created.
Replacement tenancy - i.e. a new AST is created between the same landlord and tenant for the same property on substantially the same basis, – TDP will apply to the initial deposit that was paid prior to 6 April 2007.
Students
Communities and Local Government is working closely with the National Union of Students to ensure that information will be readily available to students about Tenancy Deposit Protection from April 2007.
Will students who pay deposits be subject to tenancy deposit schemes?
Where student accommodation is let under an assured shorthold tenancy, the deposit must be safeguarded.
Halls of residence are not to be let on an assured shorthold tenancy if they are controlled by the university. However, some universities lease their halls of residence to private companies. These companies may let the accommodation on an assured shorthold tenancy.
What happens where a parent pays the deposit on a student tenant's behalf?
Where the deposit is paid for an assured shorthold tenancy, it would still need to be safeguarded in a scheme.
How would the deposit be repaid once an overseas student returns home?
Schemes will be able to return deposits into foreign bank accounts. There would be a charge for this that would need to be paid by the tenant.
