If you are a landlord, it is vital that you are aware of the requirement, introduced in April 2007, that all deposits (for rent up to £25,000 per annum) taken by landlords and letting agents for Assured Shorthold Tenancies in England and Wales must be protected by a tenancy deposit protection scheme.

There are two types of tenancy deposit protection scheme available for landlords and letting agents. These are insurance-based schemes and custodial schemes. All schemes provide a free dispute resolution service.

Landlords must be a member of one of the schemes currently in existence. Within 14 days of receiving the deposit, the landlord must provide the tenant with details of how the deposit is being protected including:

  • the contact details of the tenancy deposit scheme;
  • the landlord’s or agent’s contact details;
  • how to apply for the release of the deposit;
  • information explaining the purpose of the deposit; and
  • what to do if there is a dispute about the deposit.

If a landlord or letting agent does not protect a tenant’s deposit, they will normally have to pay them three times the deposit sum in compensation.

The new rules were introduced to counteract the actions of rogue landlords who unfairly withheld deposits at the end of a tenancy. Figures produced by mydeposits.co.uk show that since their introduction, 94 per cent of tenants in London who have appealed against a landlord’s decision to keep their deposit after the tenancy has ended have won back a share of their deposit.

The requirement to belong to a tenancy deposit scheme operates to the benefit of both landlords and tenants. From the landlord’s perspective, where damage is done to their property, the scheme allows the appropriate amount to be deducted from the tenant’s deposit as compensation. It is important, however, to make sure that an inventory is carried out at the beginning of the tenancy and once the tenancy is concluded, otherwise there is no proof of the damage claimed and the adjudicator is likely to find in favour of the tenant.

From the tenant’s perspective, the scheme protects them against the actions of unscrupulous landlords by making sure that part or all of their deposit is returned to them, depending on the circumstances.

Landlords are advised to take care to ascertain that the tenancy deposit scheme they use is a bona fide scheme. Click here for further details on the types of scheme and those available.