Introduction

WHAT IS TENANCY DEPOSIT PROTECTION?

in England & Wales

TENANCY DEPOSIT PROTECTION

Overview

Tenancy Deposit Protection, also known as TDP was introduced and added to measures to drive up the standards in the private rental market and is set out in the Housing Act 2004. These measures include licensing multiple occupancy homes (HMOs) and new safety rules.

Tenancy Deposit Protection applies to all assured shorthold tenancies (ASTs) in England & Wales, where a deposit is taken. Nearly all contracts to let a property in England & Wales is a Assured Shorthold Tenancy Agreement.

TDP came into effect on 6 April 2007 and would be valid for all new tenancy agreements from this date. There are two main aims of the scheme:

  1. To ensure good practice in deposit handling. In other words, when a tenant pays a deposit to rent a property, at the end of their tenancy, and assuming they are entitled to get it back, they can be assured this will happen fairly.
  2. To avoid or assist with any disputes by having an alternative dispute resolution service (ADR). It will also encourage tenants and landlords to have a clear agreement from the outset on the condition of the property, through best practice, such as through the use of inventories, agreement on the condition, fair wear and tear, etc.

In Summary

  • Landlords are required to join a statutory tenancy deposit scheme, if they take deposit payments from tenants.
  • This will mean all deposits are safeguarded
  • Tenants will get all or part of their deposit back, if they have kept the property in good condition and are entitled to get their deposit back from the landlord.
  • The scheme offers alternative ways of resolving disputes between tenants and landlords, which aims to be faster and cheaper than trying to resolve such matters in court.

How does Tenancy Deposit Protection work?

Landlords can choose between two types of schemes: a single custodial scheme and two insurance-based schemes. More information on the tenancy deposit protection schemes available can be found here.
  1. The tenant pays the deposit to the landlord;
  2. The landlord then pays the deposit into the scheme;
  3. Within 30 days of receiving a deposit, the landlord must give the tenant the prescribed information (to be set out in secondary legislation) about the scheme being used;
  4. At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;
  5. If there is a dispute, the scheme will hold the disputed amount until the dispute resolution service or courts decide what is fair;
  6. The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant, or landlord if the tenant isn’t entitled to it.
  1. The tenant pays the deposit to the landlord;
  2. The landlord retains the deposit and pays a premium to the insurer – the key difference to the custodial scheme;
  3. Within 30 days of receiving a deposit, the landlord must give the tenant prescribed information (to be set out in secondary legislation) about the scheme being used;
  4. At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;
  5. If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
  6. If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it

In each scheme, the deposit must be returned within 10 days of the landlord and tenant agreeing how the deposit should be divided, or within 10 days following notification of an ADR/court decision.