Tenancy Deposit Scheme
Key Points:
- Tenancy Deposit Scheme - From 6 April
2007, all deposits taken by landlords for
an Assured
Shorthold Tenancies in England and Wales (the
vast majority of tenancies), must be protected by a
tenancy deposit protection scheme.
- From this date, tenants can ask their landlord
or his agent about the details of the scheme when
signing a new tenancy agreement.
The Tenancy Deposit Schemes:
The Custodial Scheme:
The custodial scheme is to be provided free of charge for landlords and agents, paid for by the interest earned on the monies deposited into the scheme fund. It is to be run by financial and investor services company Computershare Investor Services Plc who have been awarded a contract by Government.
This company have administered a similar deposit scheme in the Australian state of Victoria for the last eight years. Online self-service will allow landlords to register and make deposit payments, transfers and repayments 24 hours a day.
Paper based transactions will also be supported. Help and advice will be available through a dedicated call centre during office hours. An independent Alternative Dispute Resolution (ADR) service, run by the Chartered Institute of Arbitrators, will help to resolve any disputes quickly and without the need for court action.
How does The DPS work?
The tenant pays the landlord or letting agent their deposit. The landlord/agent pays the deposit into The DPS within 14 days of receiving it. Following receipt of the deposit, The DPS will provide confirmation and details of the protection scheme being used to both the landlord/agent and the tenant.
The tenant pays the deposit to the landlord/agent who pays it into The DPS within 14 days of receiving it.
The DPS will provide confirmation and details of the scheme to both the landlord/agent and the tenant. At the end of the tenancy, the landlord/agent and the tenant agree repayment of the deposit and inform the scheme.
The deposit repayment, divided accordingly and including any interest accrued, will be paid to each party within 10 days. If there is a dispute, The DPS administrators return any undisputed amount (plus interest) to the relevant party, but hold the disputed portion until the ADR service or the courts decide what is fair.
Example—A tenant pays a deposit of £800. At the end of the tenancy, the landlord wishes to keep £90 to pay for cleaning the flat and the tenant agrees.
Example 2—A tenant pays a deposit of £950.
At the end of the tenancy, the landlord says he wishes to keep £200 to pay for damaged furniture. The tenant disagrees, claiming the furniture was damaged before. Both agree to use the Alternative Dispute Resolution (ADR) service. £750 (plus interest) is returned to the tenant, but the disputed £200 (plus interest) is safeguarded until the dispute is settled.
www.depositprotection.com
The Insurance Scheme (1)
Tenancy Deposit Solutions Ltd (TDSL) is a company jointly owned by the National Landlords Association and Hamilton Fraser Insurance (HFIS plc). They have been awarded agovernment contract to operate an insurance-based tenancy deposit protection scheme.
The scheme will be sponsored by the NLA and administered by Hamilton Fraser Insurance, a company authorised and regulated by the Financial Services Authority. An insurance based tenancy deposit scheme is a membership scheme allowing the landlord to continue to hold any deposit they take from a tenant during the period of the tenancy agreement.
The landlord will be required to pay a fee to protect any deposits taken from a tenant. If there is a dispute over the return of the deposit at the end of the tenancy, the scheme, supported by an insurance policy, will ensure that the amount to which the tenant is entitled is returned.
As necessary, the scheme insurers will recover the disputed amount from the landlord. The scheme is also required to provide deposit dispute assistance (ADR) which will be provided free of charge to all parties.
Any landlord resident in the United Kingdom (excluding the Isle of Man) can apply to join the scheme. Membership of the scheme is not dependent on membership of any trade body or professional organisations, though concessions are available for members of NLA or recognised professional associations for agents.
Standard Individual and Company fees—Landlords Joining Fee—(all including VAT) £58.75 Deposit Protection Fee (per deposit incl. VAT) £30.00 Annual Renewal Fee (incl. VAT) £14.70
NLA Members £47.00 £26.00 (1st 4 protections only) £14.70 respectively.
Letting Agents and Managing Agents Joining Fee per branch (exc. VAT) Members of ARLA, NAEA, RICS, NALS and UKALA £100.00
Deposit Protection Fee (per deposit exc. VAT) £20.00
Annual Renewal Fee per branch (exc. VAT) £50.00
Other agents £150.00 £30.00 £75.00 respectively.
Agents can register and set up an account now, but landlords will need to wait until after the 6th of April to do this.
www.mydeposits.co.uk
Insurance Scheme (2)
The Tenancy Deposit Scheme run by TDS was originally set-up for regulated agents around 5 years ago. Still primarily aimed at letting agents, the scheme does however make provision for landlords to register.
Regulated agents are members of the Association of Residential Letting Agents, the Royal Institution of Chartered Surveyors, the National Association of Estate Agents, The National Approved Letting Scheme (NALS) or other bodies which regulate the activities of their members and are covered by a recognised bonding scheme which protects and insures deposits.
The agent or landlord holds the deposit as at present or in a special client account. A company called The Dispute Service (The Dispute Service Limited) has been set-up to ensure protection.
If there is no dispute the agent or landlord repays the deposit, but if there is a dispute the agent or landlord is given a couple of weeks to resolve it. After that, any disputed amount is transferred to TDSL and an adjudicator is appointed who will issue a decision within 10 working days of receiving all the necessary evidence.
Fees for landlords (Ex VAT per property, per year)
-
Members of landlords’ trade associations £40.00
-
Unaffiliated landlord £95.00
-
Fees for members of landlord accreditation or other schemes to be determined.
Full details in TDS web site:
www.tds.gb.com
Never rely totally on this information which relates primarily to England & Wales. Before taking action or not, seek expert advice with the full facts of your case and all documents to hand.
