What is a tenant deposit scheme?
Tenant Deposit Schemes have been in place for assured shorthold tenancies in England from 6th April 2007. Such government-backed schemes must be used by the landlord (or letting agent) to protect the tenants’ deposit for the length of the tenancy.
Purpose of Tenant Deposit Schemes
Such schemes have been introduced to help tenants fight against landlords who try to claim all or some of the deposit at the end of the tenancy. It was noted that a fair way of settling disputes over the return of the deposit was needed and now it is in theory easier and more straightforward for tenants to resolve this issue.
Who does the scheme protect?
The scheme applies to tenants who rent from a private landlord or letting agent, have an assured shorthold tenancy (which is the case in most tenancies) and who put down a deposit. The scheme does not apply to rent in advance but it does cover the deposit regardless of who paid it e.g. a parent for a student house.
The scheme does not protect tenants whose tenancy agreement began before 6 April 2007. If a new tenancy agreement has been drawn up since this date, it is a grey area because landlords are advised to use a tenant deposit scheme yet by law they do not have to.
What happens to the deposit?
On receiving the tenants’ deposit, the landlord or agent has two options: a custodial scheme or an insurance scheme. In the first case, the landlord pays the deposit to the scheme, which then holds it until the end of the tenancy.
In the second, the landlord may keep the actual deposit but they must pay insurance premiums into the scheme. This means that if a dispute should occur, the deposit is insured and the tenant will be paid back by the scheme. The insurance scheme may charge the landlord membership fees but both options are free to tenants.
What does the landlord or agent have to do at the start of the tenancy?
Within 14 days of the deposit payment, the landlord or letting agent must provide certain information including
Their contact details
The tenant deposit scheme they are going to use and their contact details
Information on the purpose of the deposit
Information on the return of the deposit at the end of the tenancy
Information on what to do if there is a dispute
For more information on:
- What should the tenant do if they do not receive details of the tenant deposit scheme?
- What should the tenant do at the start of the tenancy?
- What happens to the deposit at the end of the tenancy?
- What should the tenant do if there is a dispute?