Since 6 April 2007, a landlord under an Assured Shorthold Tenancy Agreement, must protect any deposit received under one of the Tenancy Deposit Protection Schemes (“TDPS”) and also provide prescribed information of the scheme to the tenant within 14 days of receipt of the deposit. These are known as the initial requirements.
The aim of the TDPS is to reduce the number of disputes between landlords and tenants over the refund of deposits as approximately one in five tenants complain that some or all of their deposit has been withheld unjustifiably.
It must be noted that the TDPS only applies to residential Assured Shorthold Tenancies and not to any other types of tenancy.
The TDPS is mandatory and landlords are obliged to join one of the statutory Tenancy Deposit Schemes if they take a deposit from their tenant.
The Landlord may choose between two different types of schemes as follows:-
• A Custodial TDPS. This scheme requires a landlord to pay the tenant deposit to a scheme administrator within 14 days of receipt from the tenant. The Scheme Administrator holds the deposit until the tenancy comes to an end. The deposit (or balance due to the tenant) is returned to the tenant.
• An Insurance TDPS. This scheme is whereby the landlord retains possession of the deposit but secures it by paying a fee and insurance premiums to the Scheme Administrator. The Scheme Administrator will use the premiums to pay the tenant should the Landlord misappropriate the deposit.
The key difference between the two types of TDPS is that with the Custodial scheme, the deposit is held by the Scheme Administrator and with the Insurance Scheme, it will be held by the landlord.
As a Landlord you must act quickly
Do own a property with tenants who currently occupy under an Assured Shorthold Tenancy Agreement? If so, have your tenants paid a deposit? If they have and the deposit was paid post 6 April 2007, the TDPS requirements will apply.
• Immediately pay the deposit in a TDPS if this has not already been done.
• Give the Tenant details of the TDPS. This should be done within 14 days of paying the deposit into the TDPS.
• If you are having trouble ascertaining if the deposit was paid into a TDPS (ie you buy a property with tenants already in occupation but the Seller does not provide the relevant information) then you may want to make enquiries of any one of the 3 TDPS companies:-
The Deposit Protection Service (The DPS) 0870 707 1 707
Tenancy Deposit Solution Ltd (TDSL) 0871 703 0552
The Tenancy Deposit Scheme (TDS) 0845 226 7837
PLEASE BE AWARE….If you buy a property subject to an Assured Shorthold Tenancy (ie there are tenants already in occupation), ensure that any deposit is protected and that the tenants have been given details of the TDPS. If not, you will be subject to the sanctions below.
Sanctions
There are potential significant sanctions if the initial requirements of a TDPS are not complied with. The 2 general sanctions are:-
• You may not be able to recover possession of the property.
• You could be fined by the Court.
Recovering possession
When an Assured Shorthold Tenancy has been granted, the landlord can get an Order for Possession at any time after the first six months has elapsed if the Landlord has given at least two months notice to the tenant. This is also known as a “Section 21 Notice”. If the deposit has not been protected by the Tenancy Deposit Protection Scheme, the landlord will not be permitted to serve a valid Section 21 Notice.
It appears that the intention of the legislation is that the right to serve a Section 21 Notice should merely be suspended until such time as the deposit has been protected, however, it is not clear that the legislation as drafted achieves this result and therefore, it is most important that the requirements be complied with within 14 days beginning with the date on which the tenancy deposit is received.
Financial Penalty
Where a Tenancy Deposit has been paid in connection with an Assured Shorthold Tenancy, the tenant can make an application to the County Court if:-
• The initial requirements of the TDPS have not been complied with by the Landlord.
• The tenant has been informed by the landlord that the deposit is held under a TDPS but has been unable to get confirmation from the scheme administrator that the deposit is indeed held in accordance with that scheme.
If the Court is satisfied that either of the above situations apply then the Court can make either of the following Orders:-
• That, within 14 days from the date of the Order, the person who holds the deposit pay it to the Tenant
• That, within 14 days from the date of the Order, the person who holds the deposit pay it into a designated account held by the Scheme Administrator under an authorised custodial TDS.
The Court must order the landlord to pay the tenant within 14 days of the Order, a sum of money equal to 3 times the amount of the deposit.
For further details of the Tenancy Deposit Protection Schemes you may find it of assistance to visit www.direct.gov.uk/en/TenancyDeposit/index.htm
For more information please contact