Deposit protection schemes help tenants get their deposit at the end of their tenancy. It is a legal requirement and has been applied since 2007 for United Kingdom Landlords. With this, tenants get to protect their deposit in a protection scheme which is completely government authorized. It is, however, not mandatory for the landlord to collect adeposit, but if they do, then they have to deposit it in the scheme, within 30 days of receiving it.. (for landlord property tax related issues, connect with our accountant)
As for the landlords who have invested in buy-to-let properties, it is important for them to adhere to the deposit protection schemes and landlords.
Different types of schemes
The three schemes that are protected by law are
- My Deposits
- Tenancy Deposit Scheme
- Deposit Protection Service
The other two types of schemes which are available within these schemes are insurance and Custodial.
- Insurance Tenancy Deposit Scheme
In this scheme, the landlord insures the money, in case of any delay and repays it through that insurance. In case of any dispute or misunderstanding between the tenant and the landlord, the insurer intervenes and settles the money, later collecting from the landlord. But this scheme is applicable only to landlords, who are members of professional and approved organizations such as the trade association and others.
- Custodial Tenancy Deposit Scheme
In this scheme, the tenant’s deposits are kept in a bank account, which cannot be handled by either the tenant or the landlord. The money is released only after the tenancy gets over and after the complete settlement between the landlord and the tenant.
All you need to know about tenancy deposit protection scheme (TDP)
- The landlord needs to deposit the money obtained from their tenant in the scheme within 30 days of obtainingit, and this is a legal requirement.
- Once the landlord is done depositing the money, they would receive a receipt or a certificate for the same.
- The landlord also needs to ensure that they pass on a copy of the receipt to the tenant without fail.
Here are a few things that the landlord must keep in mind and pass on to the tenant, within 30 days of receiving the deposit.
- The landlord must inform the tenant as in how much money they have paid asa deposit, along with the details of how the money has been protected and by which scheme.
- The complete address of the property rented by the tenant along with the contact details of the landlord also needs to be mentioned.
- Information on how to get one’s deposit back along with details of dispute settlement, application to get the deposit back and others has to be explained in detail by the landlord.
The above-mentioned information needs to be passed on to the tenant by the landlord within 30 days of receiving the deposit, and if not, then it’s the tenant’s responsibility to make sure that they get that information as soon as possible.
Is it mandatory for the landlord to put the money in a deposit?
Yes, it is absolutely mandatory for the landlord to put the money in any kind of protection scheme and if not then the tenant can very well take the landlord to the court and legally ask them to put it in a deposit scheme or repay the entire deposit to the tenant. The tenant can also claim for compensation from the landlord, if they have failed to deposit the money, and the compensation can go anywhere between one to three times of the actual deposit money, which the landlord has to pay without fail.
Fees pertaining to deposit protection schemes?
Feesvary from one provider to another, and if you are a landlord, who is planning to deposit their tenant’s money in a scheme, then make sure you compare the fees between the various providers, in order to make an optimum decision.
The two different type of schemes Insurance Tenancy Deposit Scheme and Custodial Tenancy Deposit Scheme has separate fees, which also majorly depends on how much one person deposits in that particular scheme
Custodial Tenancy Deposit Schemes are usually free of any charge or fee whereas Insurance Tenancy Deposit Scheme could cost around £20 for a minimum deposit of £500 and around £26 for deposits that exceed £500. The landlord might also need to pay a membership fee, while joining the scheme, in addition to the regular fee.
When should the landlord repay the deposit money?
The landlord has to repay the deposit at the end of the tenancy, based on agreement between the landlord and the tenant. The deposit has to be returned on time and in case of any delay, the tenant can ask for compensation. The tenant and the landlord also need to agree on the fact on how they are going to receive and repay the deposit respectively. If there is any miscommunication or fallout during this particular stage, then it is known as a dispute and can be solved via the Alternative Dispute Resolution process.
What exactly are deposit disputes?
When there is a disagreement between the landlord and the tenant based on how much money needs to be deducted from the deposit, then that kind of disagreement is known as deposit dispute.
The Alternative Dispute Resolution process then comes in place and tries to resolve the issue between the landlord and the tenant.
Alternative Dispute Resolution process
A qualified adjudicator, who is completelyimpartial takes part in this process and acts as a moderator between the landlord and the tenant. Both the parties are provided opportunities to present their evidence and based on that, the adjudicator makes an unbiased decision, on who should receive the deposit, the landlord or the tenant.
Evidenceincludes documents, photographs, invoices and others which will be considered vital during the process and has to be absolutely original without any tampering.
The likelihood of the landlord receiving the deposit is higher under the following conditions
- If the tenant misses to pay the rent or leaves the property without paying the last month’s rent.
- Any damage to the property caused by the tenant, which includes wear and tear, redecoration, cleaning, and others.
- If the property has a garden, then the tenant needs to make sure that they take full care of it and while leaving give it back in the same condition as it was earlier. Photographs play a vital role here, and both the tenant and the landlord needs to make sure that they take enough photographs of the garden as evidence, which would be useful to them in future.
The tenant and the landlord can also seek advice from a solicitor, who provides legal services both in England and in Wales.
Whether you are a tenant or a landlord, make sure you understand and keep in mind the various rules regarding the various deposit schemes, which will help you keep track on the deposit and on the fact that who should receive it. As a landlord, you need to make sure that you deposit the money within 30 days of receiving it and as a tenant, you need to make sure that the landlord deposits the money, and if not, then you very well claim for compensation. If you have any other queries pertaining to this law, then feel free to contact one of our counsellors.