Tenancy Deposits:

According to TDS (Tenancy Deposit Scheme) less than 1% (0.85%) of tenancies they handle have resulted in a deposit dispute in the year to March 2018, nevertheless it’s important to get it right when dealing with tenants’ deposits.

Cleaning was the most common issue leading to a deposit dispute, cited by TDS in 54% of all disputes handled through adjudication, closely followed by damage (49%), decoration (31%), rent arrears (20%) and gardening (16%).

The Legislation

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The Tenancy Deposit Protection (TDP) legislation was first introduced on the 6 April 2007, with amendments to this following several court cases in the Localism Act 2011, and the Deregulation Act 2015. These additional changes can easily be overlooked by landlords and letting agents in has become a more complex set of rules.

The Deregulation Act 2015 changes brought in the concept of the “relevant person”; a person or organisation, someone else providing the tenancy deposit on behalf of the tenant.

What are the implications?

Where the deposit is paid by another person other than the tenant, or if the provision is joint between the tenant and the “relevant person”, another person/s or organisation, then all parties must be provided with the Prescribed Information (PI) which also includes their details.

So, similar to the situation where a guarantor is involved, all the necessary information must be provided to all parties and any changes mean they must be kept informed.

A relevant person, as far as tenancy deposits are concerned, might be a Local Authority, an Employer, a Guarantor, a friend or a family member. It is important therefore that landlords ask the question: who provided the deposit? It would be wise to include this question in the Tenancy Application Form for future reference.

If someone or some organisation pays the deposit, or even part of the deposit, it is important that they are served with the relevant PI documents, including the deposit scheme leaflet, and that proof of this service is obtained at or near the outset of the tenancy – 28 days are allowed to protect deposits and serve the prescribed information.

Landlords and letting agents should be aware of this obligation and take steps to build it into their administration process. Every time a tenant pays the funds for a deposit either in cash, cheque or card, they should be asked to confirm the origin of the payment.

A paper trail should then be established in the files to enable the correct documents to be served at the right time and to the correct people, and proof to be provided in the event of any dispute.

It is also advisable that the details of deposit scheme to be used, the payments made and who paid, are recorded in the tenancy agreement.

2 COMMENTS

  1. The concept of a “Relevant Person” was in the Housing Act 2004, which introduced the legislation requiring tenancy deposits to be protected.
    It wasn’t introduced by the Deregulation Act.

    The requirements relating to a “Relevant Person” are not as stated.
    If someone gives the money to the tenant and the tenant then hands it over to the landlord or agent, the person providing the money isn’t paying the deposit “on behalf” of the tenant.
    The tenant is paying the deposit (in as much as a deposit can be considered to be “paid” at all).

    If the person providing the money pays it themselves directly to the landlord or agent, they’re paying “on behalf of the tenant”. In that case, they are a relevant person.

    There’s absolutely no need to inquire about where the tenant got the funds for the deposit (and no obligation on the tenant to respond if asked).

    The Prescribed Information doesn’t include A “deposit scheme leaflet” unless the scheme says it does. Not all of them do.

    There aren’t many resources for landlords and it would help if the ones that there are did some basic research before posting convincing looking but misleading articles.

  2. Thank you John-Paul
    That is my understanding as well.
    I was also led to believe that if the deposit is paid by credit card then (because of the nature of the transaction) the credit card company could also be a ‘relevant person’ . Would you happen to know if that could be the case?
    In our tenancy agreement we have wording to the effect that any monies received by the landlord or agent for rent or a deposit by a party other than a tenant is deemed to have been received on behalf of the tenant without further enquiry.

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