Deposit Protection - September 2014

Posted on: September 1st, 2014 Category: Landlord News

When you receive a deposit from your new tenants, you can’t just pop it into your bank account or ISA.

Within 30 days of receiving the deposit, you or your letting agent must place it into a government-backed Tenancy Deposit Protection (TDP) scheme. This is mandatory when renting out a property on an assured shorthold tenancy that started after 6th April 2007.

In England and Wales, tenancy deposits can be registered with:

• Deposit Protection Service (Custodial and Insured)
• MyDeposits - including deposits that were held by Capita
• Tenancy Deposit Scheme

Turner Scott place deposits with the Deposit Protection Service (DPS). There are separate TDP schemes in Scotland and Northern Ireland.

One of the roles of TDP schemes is to make sure that tenants get their deposits back providing that they:

• meet the terms of the tenancy agreement
• don’t damage the property
• pay the rent and bills

At the end of the tenancy, you must return the deposit within 10 days of both parties agreeing how much the tenant will get back If there is a dispute, then the deposit will be protected in the TDP scheme until the issue is resolved.

The scheme also offers a free dispute resolution service if you disagree with your tenant about how much deposit should be returned. You don’t have to use the service but if you do, both you and the tenant have to agree to it. Both parties will be asked to provide evidence and the decision made about the deposit will be final.

Another benefit of the scheme is that you can still ‘raise a dispute’ to retain deposit money back even if you can’t get in contact with the tenant. The TDP scheme will refund the requested amount of deposit if the dispute resolution service agrees. There may be a limit on the time you have to raise a dispute, so you need to contact the TDP scheme as soon as possible.

As a landlord, you do not have to use the TDP scheme to protect a holding deposit (i.e. money paid to you to ‘hold’ a property before an agreement is signed). Once they become a tenant, the holding deposit becomes a ‘tenancy’ deposit, which must be placed in a TDP scheme.

Landlords must still use a TDP scheme even if the deposit is paid by someone else, such as a rent deposit scheme or the tenant’s parents. The penalty for not protecting a tenancy deposit can be up to 3 times the value of the deposit.