Tenancy Deposit Schemes

Published on 2015-07-16

Deposits where there is an Assured Shorthold Tenancy (AST) are required to be protected under an approved scheme, which is either custodial or insurance-based (or both), and acts independently of agents and landords.

Schemes and Procedures

The landlord or agent must:

  • Within 30 days, contact the scheme being used and give details of the deposit, pay the deposit to the scheme (for custodial schemes) or pay the required fee (for insurance-based schemes)
  • Within 30 days, give the tenant details of the prescribed information and the scheme being used
  • At the end of the tenancy, return any agreed or determined amount of deposit within 10 days of agreement or determination.

The Landlord or agent must give the tenant certain information within 30 days covering, for example:

  • Property address and deposit amount
  • Contact details of the scheme and the landlord or agent
  • Procedures for deposit release
  • Dispute procedures.

Restrictions and penalties apply if these rules are not followed.

Custodial Scheme

The Deposit Protection Service (DPS) is the only approved custodial scheme. It’s free and open to all landlords and agents. Interest on deposits is retained by the DPS to pay for the services provided.

Under this scheme, once the tenant pays the deposit, the landlord or agent pays it to the scheme within 30 days and provides the tenant with the prescribed information and details of the scheme within 30 days. At the end of the tenancy, the scheme will pay out the deposit as agreed between the parties. If there is a dispute, the deposit remains with the scheme until it is resolved. Upon resolution, it is usually returned within 10 days.

Insurance-Based Schemes

There are two approved insurance-based schemes: Tenancy Deposit Solutions Ltd (TDSL) and The Tenancy Deposit Scheme (TDS), a not for profit scheme. Landlords can join either directly or through an agent; agents can also join either scheme. With TDSL agents can pay a fee for each deposit taken and protected or have an annual account based on the number of tenancies registered. With TDS, agents pay a fee per tenancy deposit registered. Where there are joint tenants, all the tenants need to be notified to the scheme.

Disputes

There is a dispute resolution service built into all the schemes which is free to use but not mandatory. Where this is used, the decision is binding on both parties. The custodial scheme continues to hold the deposit until resolution. Once settled, payment is made in accordance with the decision of the dispute service within 10 days. With insurance-based schemes, the landlord or agent hands over to the scheme the disputed part of the deposit, and the scheme will hold this until the dispute is resolved. It is then distributed within 10 days.

Inventories and Schedules of Condition

Having an inventory and schedule of condition at the start of a tenancy, although not mandatory, makes any claim for damages against the deposit much easier to establish as they will be taken as the measure of the state of the property and the landlord’s fixtures and fittings at the start of the tenancy.

Categories: Residential Lettings Best Practice