Tenancy deposit scheme - England and Wales

 

All deposits taken by landlords in England and Wales must be protected by a tenancy deposit scheme. The scheme applies only to Assured Shorthold Tenancies (ASTs) where the landlord doesn’t live in the property. It doesn’t apply if your landlord lives in the property and you’re a lodger.  Scotland has its own scheme. Click here for info on tenancy deposit regulations in Scotland.

There are two main reasons for the scheme:

  • To ensure that tenants who are entitled to their full deposits get them back at the end of the tenancy
  • To assist in resolving disputes about refund of deposits

The scheme also aims to encourage landlords and tenants to make the terms and conditions of the lease clear from the outset  to avoid disputes in the first place.

There are two types of scheme and it’s up to the landlord to choose which they use.

These are:

Custodial

  • The tenant pays the deposit direct to the landlord who then pays it into the scheme
  • The landlord must provide information to the tenant about the tenancy and which scheme has been used within 30 days
  • At the end of the tenancy, if both parties agree to the amount of deposit returnable, the scheme is notified and returns the deposit to be divided as agreed
  • If there’s a dispute as to the amount of deposit to be returned the scheme will hold on to the deposit until the dispute is resolved
  • Interest on payments held during dispute settlement will be used to pay for the running of the scheme, with any left over paid to the tenant (or the landlord if the tenant isn’t entitled to it)

Insurance-based

  • The tenant pays the deposit direct to the landlord
  • The landlord retains the deposit and pays a premium to the insurer
  • The landlord must provide information to the tenant about the tenancy and which scheme has been used within 30 days
  • At the end of the tenancy, if both parties agree to the amount of deposit returnable, the landlord returns the appropriate amount of the deposit
  • If there is a dispute the landlord must hand over the disputed amount to the scheme for safe-keeping until the dispute is settled
  • If the landlord fails to comply the insurance arrangements will ensure that the tenant receives their deposit back if they’re entitled

Under both schemes the deposit must be returned within 10 days of agreement or settlement of any dispute.

Landlords have 30 days to protect a deposit and supply their tenant with the relevant information. If a landlord doesn't comply they can face legal proceedings and a fine of up to three times the amount of the deposit in question. Penalties can still apply even if the landlord complies after the 30 day period.

For more information on the scheme visit the Shelter website or see Direct.gov.uk

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