TENANCY DEPOSIT PROTECTION SCHEME

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 CUSTODIAL SCHEME  |  INSURANCE-BASED SCHEME  |  WHY DID THE GOVERNMENT INTRODUCE THESE SCHEMES  |  NON COMPLIANCE
 
 
This applies to all assured shorthold tenancies entered into on or after the 6th April 2007. Any security deposit paid for before this date will not have to be held in one of the three tenancy deposit schemes.

To try to reduce the number of disputes that have to go to court these schemes are supported by an Alternative Dispute Resolution (ADR) service, but the use of the ADR will not be compulsory.

 
CUSTODIAL SCHEME:

Computershare Investor Services plc operate the only custodial deposit scheme, supported by the Chartered Institute of Arbitrators who are providing the Alternative Dispute Resolution (ADR) service.

This scheme is FREE for landlords, agents and tenants to use and the interest accrued by the deposits in the scheme will be used to pay for the running of the scheme: Surplus interest will be payable to the tenant or landlord if appropriate.

The deposit will be paid back to the appropriate person within ten days of the tenancy coming to an end. In the event that there is a dispute ALL of the deposit will be held until the dispute is resolved, maximum twenty-eight day turnaround. Landlords or agents will be able to re-let their property whilst the dispute is being resolved.

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INSURANCE-BASED SCHEMES:

The Dispute Service Limited will operate an insurance-based scheme directed primarily at letting agents.

The National Landlords Association, in consortium with Hamilton Fraser Insurance, will operate an insurance-based scheme directed primarily at independent landlords.

Landlords or agents will pay an insurance premium to be allowed to hold the deposit. At the end of the tenancy the landlord / agent and tenant will inform the scheme how the deposit will be divided, and then the landlord or agent will return all or some of the deposit to the tenant. In the event of a dispute the disputed amount MUST be handed over to the scheme for safekeeping. If a landlord fails to comply the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled.

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WHY DID THE GOVERNMENT INTRODUCE THESE SCHEMES:
  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 (ADR) service.
  3. To encourage the use of professionally prepared inventories and clear terms and conditions.

Whichever scheme is chosen the deposit MUST still be paid to the landlord or agent who must inform the tenant in a prescribed format within 14 days of signing the tenancy agreement which scheme their deposit will be held in. This information should be included in the tenancy agreement.

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NON COMPLIANCE:
  1. The landlord or agent will be unable to regain possession of the property using the ‘notice only grounds’, Section 21.
  2. The tenant can apply to the court to have their deposit protected or to be given the prescribed information. Where the court believes the landlord is not complying with the TDP they must order the landlord, within 14 days of making the order, to pay the deposit to the custodial scheme administrator, or to repay the deposit to the tenant

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