Deposits & TDP

Tenancy Deposit Protection (TDP) will add to the measures already brought in to drive up standards in the private rented sector set out in Housing Act 2004. Those measures include licensing multiple occupancy homes and new safety rules. TDP will apply to all assured shorthold tenancies (ASTs) in England and Wales, where a deposit is taken. Virtually all new contracts to let a property are ASTs. It will start on 6 April 2007, and be valid for all new tenancy agreements from this date. There are two main aims: 1. To ensure good practice in deposit handling, so that when a tenant pays a deposit and is entitled to get it back, they can be assured that this will happen. 2. To assist with the resolution of disputes by having an alternative dispute resolution service (ADR). It will also encourage tenants and landlords to have in place, from the outset, clear agreement on the condition of the property through best practice, such as the use of inventories, and agreement on the condition of the property.

TDP in summary:

• Landlords will be required to join a statutory tenancy deposit scheme, if deposit taken
• This will mean that deposits are safeguarded
• Tenants will get all or part of their deposit back, if they have kept the property in good condition and are entitled to get their deposit back.
• The scheme offers alternative ways of resolving disputes which aims to be faster and cheaper than taking court action.

An Overview of TDP:

Humphriss & Ryde are members of the Tenancy Deposit Scheme (TDS) which means that we can handle the deposits for landlords and tenants in line with current government regulations.

What is Tenancy Deposit Protection?

From 6 April 2007, all deposits taken by landlords for what is called Assured Shorthold Tenancies – the vast majority of tenancies – in England and Wales must be protected by a tenancy deposit protection scheme. To avoid disputes going to court, each scheme will be supported by an alternative dispute resolution service (ADR), whose aim is to make disputes faster and cheaper to resolve.

How does TDP work?

Landlords will be able to choose between two types of scheme: a single custodial scheme and one or more insurance-based schemes.

Insurance-based schemes:

• The tenant pays the deposit to the registered scheme user;
• The registered scheme user retains the deposit and pays a premium to the insurer;
• Within 14 days of receiving a deposit, the landlord must give the tenant information about the scheme being used;
• At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the registered scheme user returns all or some of the deposit;
• If there is a dispute, the registered scheme user must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
• If for any reason the registered scheme user fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.
Example: a tenant pays a deposit of £1000. At the end of the tenancy, the landlord says he wishes to keep £200 to pay for replacing damaged furniture. The remaining £800 will be returned to the tenant. The tenant disagrees, claiming the furniture was damaged when they moved in. Both agree to go to ADR, so the disputed £200 will be transferred to the scheme administrator until the dispute is settled.

Custodial scheme:

• The tenant pays the deposit to the landlord;
• The landlord then pays the deposit into the scheme – the key difference to the insurance scheme;
• Within 14 days of receiving a deposit, the landlord must give the tenant information about the scheme being used;
• At the end of the tenancy, 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 courts decide
what is fair;
• The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will used to offer interest to the tenant, or landlord if the tenant isn’t entitled to it.

In each scheme, the deposit must be returned within 10 days of the end of the tenancy provided the landlord and tenant have agreed the amount.