Landlord Or Tenant? Tenancy Deposit Schemes Explained

Online, August 10, 2012 (Newswire.com) - These schemes became compulsory for all residential assured shorthold tenancies (ASTs) created on or after 6 April 2007 and are intended to prevent a landlord from failing to return a tenant's deposit and to ensure a landlord is not left out of pocket when a tenancy expires and a tenant abandons the property.

What is an assured shorthold tenancy?
An assured shorthold tenancy is residential tenancy, however it cannot be an assured shorthold tenancy if the rent exceeds prescribed limits:
 £100,000 per annum in England (increased from £25,000 from 1 October 2010).
 £100,000 per annum in Wales (increased from £25,000 from 1 December 2011).

What is a TDS?
A landlord under an assured shorthold tenancy (AST) must protect a tenant's deposit by using an authorised tenancy deposit scheme (TDS) operated by an approved scheme administrator. A TDS has two main objectives:-
 To ensure that, when a tenant pays a deposit, it will be protected and returned to the tenant at the end of the AST, except when the landlord has a legitimate claim on it.
 To resolve disputes between landlords and tenants using dispute resolution rather than via the courts.
There are two types of TDS:-
 A custodial TDS requires a landlord to pay its tenant's deposit to a scheme administrator, who holds the deposit until the tenancy ends.
 An insurance TDS where the landlord retains possession of the deposit, but secures it by paying a fee and insurance premiums to the scheme administrator.

What are a landlord's obligations under a TDS?
Within 30 days of receipt of the deposit a landlord must:-
 Comply with the "initial requirements" of the TDS.
 Give the tenant certain "prescribed information".

What sanctions are available if a landlord fails to fulfil their obligations under a TDS?
 A tenant can (even if the tenancy has ended ) make an application to the Court on either of the following grounds:-
1. The landlord has not complied with its obligations in relation to the initial requirements of an authorised scheme or the prescribed information requirements.
2. That the tenant (or any relevant person) has been notified by the landlord that a particular authorised TDS applies to the deposit paid to the landlord, but that the tenant (or relevant person) has been unable to get confirmation from the scheme administrator that the deposit is indeed held in accordance with that scheme.
 The penalty for failing to comply with the TDS may be between one and three times the deposit amount.
 If a landlord fails to join a TDS, the landlord may be prevented from recovering possession of its property from the tenant.

More information
We hope that you found this newsletter useful. Please note this article covers the basics, but does not constitute formal legal advice. Do not hesitate to contact Bevan Kidwell if you would like to discuss your individual case in more detail. If you require any other legal advice in relation to property and/or landlord and tenant issues, please contact John Bevan of Bevan Kidwell on 020 78431820 or send your email to [email protected].