Importance of Tenancy Deposit Scheme


When applying for a private residential rental property, you should be financially prepared and place money aside in order to accommodate the deposit which you would be expected to transfer over to your agent or landlord (usually totaling 6 weeks rent), who in turn will place it within a government protected scheme. The Housing Act 2004 Part 6 introduced tenancy deposit schemes to cover the deposits paid by tenants who had assured shorthold tenancies (ASTs) however tenancies that are not ASTs are not covered by this legislation, and cannot be covered by tenancy deposit schemes.

There are multiple approved schemes including custodial, insurance-based or both. In each case, the legislation makes it mandatory for a deposit taken for an AST to be protected by an approved scheme. The legislation also sets out certain criteria that must be followed by the landlord or agent, these include: registering the deposit within 30 days, providing the tenant details of the prescribed information & deposit scheme within 30 days and at the end of the tenancy return any agreed or determined amount of deposit within 10 days or agreement or determination.

Should either your agent or the landlord not fulfil his legal obligation of registering the deposit, there are penalties and restrictions that would apply, including: preventing the landlord from serving a Section 21 Notice to bring the tenancy to an end, if the tenant applies to the country court the court will require the deposit to be repaid to the tenant or protected under an approved scheme and the court must also order the landlord or agent to pay the tenant a penalty of between one & three times the amount of the deposit. Best make sure you register the deposit!!

It is not a legal requirement to have an inventory carried out prior to occupation, however it is certainly strongly recommended as it schedules the condition of the property and provides protection for both the landlord and the tenant to help resolve any disputes come the end of the tenancy.

The most commonly used schemes include The Deposit Protection Service (DPS), Tenancy Deposit Scheme (TDS) & My Deposits.

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