Tenancy Deposit Scheme

What Is The Tenancy Deposit Scheme?

In the UK you will be required to pay a security deposit to your Landlord or their letting agency, usually equal to approximately six weeks rent. This will be held against dilapidations until the end of the tenancy. The tenancy deposit scheme safeguards the deposits relating to Assured Shorthold Tenancies in England and Wales under the provisions of the Housing Act 2004.

This scheme is designed to strengthen the Tenant's position and ensure that a fair and correct amount of deposit is returned to them after agreed deductions have been made and within a reasonable amount of time.  The scheme also encourages Landlords as well as Tenants to make a clear agreement from the start about the condition of the property.

The legislation does not currently apply to deposits relating to Non Housing Act tenancies although they can be deposited in the scheme. Several factors determine which of the two tenancy types will apply. The following criteria must be fulfilled in order for an Assured Shorthold Tenancy, which will generally favour the Tenant, to be used.

• The Tenant must be an individual or group of individuals but not a company
• At least one of the named Tenants must occupy the property as their principal home
• The annual rent for the property must not exceed £25,000
• The Landlord must not be resident in the property

When Did The Tenancy Deposit Scheme Start?

The scheme was introduced on the 6th April 2007. For all Assured Shorthold Tenancies that started after the 6th April 2007 the Landlord or agent is required to subscribe themselves to a Tenancy Deposit Scheme with which they register every deposit they hold.

Types of Tenancy Deposit Scheme

There are two types of tenancy deposit schemes that a letting agent or Landlord can register a deposit with. Both of these schemes provide a free dispute resolution service and provide the same protection to you, the Tenant.

Insurance-based Scheme

This scheme allows for the deposit to be paid directly to the Landlord. The Landlord will then hold the deposit and in return pay a premium to the insurer – this is the main difference between the two schemes.

Custodial Scheme

With this scheme the deposit is paid directly to the agent or Landlord. The agent or Landlord will then pay the deposit to a third party company, appointed by the government, for the duration of the tenancy.

Who Are The Appointed Companies To Hold The Deposit?

The government has appointed three companies to run the tenancy deposit scheme.

What Happens When You Have Paid The Deposit?

Within 14 days of receipt of the deposit from the Tenant, the Landlord or agent must provide you with details about how the deposit is protected, these need to include:

• Contact details of the tenancy deposit scheme chosen
• Contact details of the agent or Landlord
• How you can apply for the release of the deposit
• Information explaining the purpose of the deposit
• What to do should there be a dispute about the deposit

Return of the deposit

How Is The Deposit Returned At The End Of The Tenancy With An Insurance-based Scheme?

When an agreement is reached about how the deposit should be divided, the Landlord or agent will return all or some of the deposit.

If there is a dispute about the amount being returned, the Landlord must hand over the disputed amount to the insurance scheme for safe-keeping until the dispute has been resolved.

If the Landlord for any reasons fails to return the correct amount of the deposit to you in accordance with the guidelines, the scheme will ensure that the entitled deposit amount is returned to you.

How Is The Deposit Returned At The End Of The Tenancy With A Custodial Scheme?

When agreement is reached between the Tenant and Landlord as to how the deposit will be divided, the scheme will return the deposit in the agreed proportions on the written instructions of both the Landlord and Tenant. Should there be a dispute; the scheme will hold the deposit until the dispute resolution service or courts decide what is fair.

Be aware that any interest accrued by deposits being held in the scheme will be used to pay for the running of the scheme, which does not charge a fee to register deposits.

Deductions From Deposits

The Tenancy Deposit Scheme does not prevent the Landlord from making reasonable deductions from your deposit. Your tenancy agreement will contain clauses referring to possible deductions and your responsibilities however the most common cause is damage to the property over and beyond 'fair wear and tear'. To reduce the possibility of disputes over deductions from the deposit it is important to thoroughly check the inventory for your property at the start of your tenancy.

Click here to go to the Directgov website where you can get further information on The Tenancy Deposit Scheme.

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