Question: Tenancy Deposit Scheme (TDS) I believe the TDS scheme commenced on 6th April 2007. How does it work and how will it affect existing tenancies?
Answer: The Tenancy Deposit Scheme commenced on the 6th of April 2007. Any deposit taken for an Assured Shorthold Tenancy (AST) after this date will need to be protected in one of the approved schemes and disputes will be handled by a process known as Alternative Dispute Resolution (ADR) set-up in the schemes, or by the courts if complex or the parties prefer it.
Deposits taken for current tenancies commenced before April 2007, which are renewed or have become statutory periodic tenancies, should have had their deposits protected.
Landlords can choose between a single custodial scheme, run by an appointed government agency (Deposit Protection Service) http://www.depositprotection.com/ and three insurance schemes: (1) Tenancy Deposit Solutions Ltd (TDSL) http://www.mydeposits.co.uk/ run jointly by the National Landlords Association and Hamilton Fraser Insurance and (2) The Tenancy Deposit Scheme (TDS)http://www.tds.gb.com/ run by The Dispute Service. (3) The Capita Tenancy Deposit Scheme: Capita Tenancy Deposit Protection
The custodial scheme involves the landlord or agent registering and lodging deposits in the scheme. It is free to the landlord (or letting agent).
With the insurance schemes the landlord or agent will retain the deposit (strictly in a client account), but will need to lodge any disputed amount, if and when a dispute arises, with the insurance schemes. The landlord or agent will pay an annual premium to belong to one of the insurance schemes and a fee for each letting.
Landlords and Agents are obliged to provide certain prescribed information about the chosen scheme to tenants within 30 days of taking a deposit. This will be known as a Section 213 Notice. See: Statutory Instrument 2007 No. 797 The Housing (Tenancy Deposits) (Prescribed Information) Order 2007.
It is very important that landlord obtain proof of service when they serve the prescribed section 213 notice.
The relevant Tenancy Deposit Scheme sections of the 2004 Housing Act are:
Other useful information:
3 Statutory Instrument 2007 No. 797 (Prescribed Information – Section 213 Notice)
6 The Guild of Residential Landlords Guide on Tenancy Depsit Schemes - http://www.tenancydepositschemes.net/
The Deposit Protection Service have put out the following example letting agreement clause and a statement to help landlords and agents:
“The deposit, £ xxx will be protected by The Deposit Protection Service (The DPS) in accordance with the Terms and Conditions of The DPS. The Terms and Conditions and ADR Rules governing the protection of the deposit including the repayment process can be found at www.depositprotection.com”
The inclusion of this clause in the tenancy agreement simply identifies the scheme under which the deposit will be protected and does not remove the landlord’s obligations to provide the prescribed information in accordance with The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 following the protection of the deposit.
The DPS will provide information to the tenant, the landlord, and any relevant party advised as part of the deposit submission confirmation as set out in our Terms and Conditions in support of the requirements of parts (a) to (f) of Section 2, Prescribed information relating to tenancy deposits set out within the Statutory Instrument 2007 no 797 The Housing (Tenancy Deposits) Prescribed Information) Order 2007 (the “Information Order”).
The DPS cannot and is not required, however, to deliver all aspects of the information and conditions set out in part (g) Section 2 of the Information Order.
The Housing Act 2004 makes clear (s213 (5)) that the responsibility to provide all of the Prescribed information to the Tenants and any Relevant Party associated with the tenancy lies with the Landlord.
The New Deposit Rules – 6th April 2012
New amended rules introduced in the Localism Act 2011for protecting tenants’ deposits came into force on Friday 6th April 2012.
Landlords should be aware that if they fall foul of these new rules, judges are unlikely to deal with them as leniently as has been the case in the past.
The Deposit protection rules were originally introduced 6th April 2007 which then forced all residential landlords who took tenancy deposits to protect them by means of one of the three government approved schemes – TDS, MyDeposits and Deposit Protection Scheme.
These 2007 rules provided for some quite tough sanctions on landlords if they failed to protect a tenant’s deposit within a 14-day time period and in addition serve on the tenant a statutory notice informing them about the scheme the landlord had used.
The upshot was that landlords could not use the court possession procedure until the deposit was protected and were subject to a fine of 3 times the deposit.
However, inadequacies in the drafting of these rules in the 2004 Housing Act allowed successful appeals against some aspects of the rules, and in effect most landlord got away with either protecting late or not at all.
Under the new rules now introduced in the Localism Act 2011, this is no longer likely to be the case. Although landlords will now be given longer – 30 days – up from 14 days – to protect a tenant’s deposit, and issue the notice, penalties are in future likely to be strictly enforced by judges.
The longer (30 day) period given will mean that landlords can no longer rely on time pressure excuses for not protecting the deposit; though any fine will now be discretionary – the judge can decide between one and three times the deposit amount depending on the seriousness of the offence, as opposed to the previous fixed three times deposit penalty.
These new rules apply to all new tenancies commencing on or after 6th April 2012. Where tenancies already exist, any landlords with unprotected deposits will have 30 days to comply.
Unlike under the old rules, tenants will be able to make a claim against their landlord after as well as during their tenancy, for a period of up to six years, where their landlord has missed the crucial 30 day deadline. In other words landlords will no longer get away with not protecting the deposit or protecting it late.
Where a landlord has failed to protect a deposit and serve the prescribed notice during the 30 day period, the section 21 possession procedure cannot be used.
The prescribe notice can be served late but the only way a landlord can evict using s21, if the deposit has not been protected, is to refund the full amount to the tenant. This will not prevent the landlord being liable to a fine for not protecting or not serving a notice, if the tenant subsequently pursues this.
See also this guidance following the Superstrike appeal court case: www.landlordzone.co.uk/news/new-guidance-tenancy-deposit
By Tom Entwistle
The DPS - Guide to Deposits & Disputes
MyDeposits - Guide to Deposits, Disputes and Damages
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