Eviction has been one of the most common causes for disputes between Landlords and Tenants. Another major cause of dispute, as one would imagine, concerns rent deposits. In April 2007, the Rent Deposit Protection Scheme was started as part of the Housing Act, 2004, which requires Landlords or agents on behalf of their Landlords to put your rent deposit in a Government-backed Tenancy Deposit Scheme (TDS).
In England and Wales your deposit can be registered with:
· Deposit Protection Service (Custodial and Insured)
· MyDeposits - including deposits that were held by Capita
· Tenancy Deposit Scheme
The scheme is aimed at ensuring rent deposits are fairly and consistently handled, and tenants who met the terms of their agreement would always get their money back. It also helps landlords to fairly use the deposit for any damages or losses of rent incurred during the tenancy. The TDS also provides a dispute resolution service to quickly resolve any disagreements and reach a satisfactory resolution.
There are important factors about TDS you must keep in mind whether you are a Landlord or a tenant.
1. Only money can be held as a protected deposit: Landlords may choose to accept deposits in the form of money or other assets such as your car or valuables like a watch. The scheme however will only provide for money paid in as a deposit.
2. Holding deposits are not covered: It is common practice to pay in a ‘holding deposit’, which is the money paid to the landlord to hold the property for a tenant before any agreements are signed. These deposits cannot be protected under these schemes.
3. Third-party: It is common for tenants to receive monetary assistance while paying the deposit, particularly young people and students. Irrespective of who pays on your behalf, any money paid in as a deposit is eligible for the protection scheme.
4. Risk of penalty: Landlords are required by the law to put the deposit amount within 30 days of its receipt within the scheme, failing which they will be breaking the law and risk penalty. Even if a tenant pays only a part of the entire deposit, the 30 day period will start from that date and therefore landlords are required to put whatever amount they have received in the scheme. In this case, the remaining deposit amount can be paid in later but will incur a cost after the 30 day period is over. This extra cost is far cheaper than the penalty imposed if the rules are not complied with.
5. Dispute at the end of tenancy: Once the tenancy agreement expires, the deposit protected under the scheme will continue to be held in the scheme in case of a dispute and until sorted out. If there are no disputes, landlords are required by law to pay back the agreed amount within 10 days.
6. Providing information to tenants: Landlords are required to furnish a set of details regarding the deposit money, the property, the chosen deposit scheme, details of the property and contact information of the landlord and deposit scheme, and information related to getting back the deposit at the end of the agreement among others. Landlords will be breaking the law and tenants can approach the court if the required information is not provided to the tenant within 30 days of the agreement. It does not matter whether the information arrives only a day or 10 days after the 30 day period.
7. Not all landlords qualify for insurance-based TDP schemes: Under this scheme the landlord holds the deposit but pays a fee to insure it. In case of a dispute at the end of the agreement, the insurer will settle with the tenant and recover the money from the landlord. However, only landlords who belong to an approved professional body - such as a trade association can use an insurance-based scheme.
8. Deposits are not mandatory: The enablement of this scheme does make it mandatory for landlords to ask for a rent deposit. This means there is a possibility landlords can ask for higher rent with no deposit. For example, instead of £400 pcm rent + £400 pcm deposit, you may find an offer for £550 pcm rent and no deposit.
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