Tenancy Deposit Scheme
 

Since the 6th April 2007 it has been a legal requirement that all deposits taken by a landlord from their tenant must be protected within a tenancy deposit scheme.
There are two providers of the tenancy deposit scheme. The Deposit Protection Service is the only custodial scheme. A second scheme is provided by Tenancy Deposit Solutions Ltd which is an insurance backed scheme.

A full resource that you should read is contained at www.direct.gov.uk/en/TenancyDeposit/index.htm
This government website has detailed information on how the Tenancy Deposit Scheme works.

Giving money to a landlord as a refundable deposit may seem like an unprotected move to those who have never let a property before. However, since April 2007 there has been a tenancy deposit scheme in place that protects the tenants’ rights regarding their deposit. There are two types of tenancy deposit schemes. These schemes are an insurance based and custodial based scheme. The schemes will keep the agreement dispute free, and offer a relevant resolution if something occurs.

In a tenancy agreement the deposit a tenant gives to the landlord is usually returned at the end of the agreement, as long as no property damage has occurred. In fact the schemes have three ways to work out how the deposit will be returned to the tenant at the end of an agreement. They are:

• The tenants are allowed to get all or part of the deposit back, if they have the right to get it back.
• The scheme does ensure that disputes will be resolved in the proper manner.
• Lastly the scheme encourages the tenancy agreement to spell out the conditions of the return of the deposit, and makes it clear for both sides when the deposit may be forfeited.

The insurance based scheme has the tenant give the deposit to the landlord. Then the landlord will keep the deposit in a secure location with insurance. The insurance is paid for by the landlord.

Under this type of agreement the tenant must receive details regarding the deposit. This information should be given within 14 days of getting the deposit. The contact details of the insurance deposit scheme need to be provided. The landlord details for contact also need to be provided. The tenant will be given information on how to get the deposit back, the purpose of the deposit, and how to file a dispute if needed. As long as the terms of the tenancy agreement have been met the tenant can expect the money returned. When a dispute is filed the landlord must hand the money over to a third party for safekeeping. If the landlord does not comply a full return of the deposit can be made through the insurance company the money was being insured by.

In a custodial scheme the tenant gives the deposit to the landlord or agent. Then the landlord chooses a scheme to put the money into. Again the landlord has 14 days to supply the information to the tenant regarding where the money is protected and how to get the money back at the end of the agreement. If the rules of the agreement are followed the deposit is divided equally between tenant and landlord. Again a dispute must be sent to the court and the deposit is with a third party for protection. The interest that may have been made on the deposit is used for costs incurred for using the scheme, and all other interest will go to the tenant.

Tenancy deposit schemes are meant to protect both parties, and ensure the deposit is returned when warranted.