02 Apr 2015

About the Tenancy Deposit Scheme

Tenancy Deposit Protection was introduced in April 2007 as part of the Housing Act 2004 for all assured shorthold tenancies in England and Wales where a deposit was taken. Introducing Tenancy Deposit Protection was identified as a way to raise standards in the lettings industry and ensure tenants are treated fairly at the end of the tenancy. There have been many amendments/additions to the rules over the years.

You must place your tenants’ cash deposit in a tenancy deposit protection scheme within 30 days of receiving it if you rent out a property on an assured shorthold tenancy. You must use a Deposit Scheme even if the cash deposit is paid by someone else, like a subsidised rent deposit scheme or a tenant’s parents. A deposit is considered ‘received’ from the moment you take the payment. This applies to all forms of payment, whether it’s a cheque, a bank transfer or cash. If you receive a valuable item as a deposit instead of money (e.g. a car or watch), you don’t have to put it in a scheme.

There are three government backed schemes and they ensure your tenants will get their deposit back if they:

  • meet the terms of your tenancy agreement
  • don’t damage the property
  • pay the rent and bills

Holding deposits
If you’ve received a holding deposit from your future tenants (money to ‘hold’ a property before an agreement is signed), you don’t have to protect it. Once they become tenants the holding deposit becomes a deposit, and you must protect it.

Information you must give to your tenants (prescribed information)
Within 30 days of getting their deposit, you must tell your tenants:

  • the address of the rented property
  • how much deposit they’ve paid
  • how the deposit is protected
  • the name and contact details of the tenancy deposit protection scheme and its dispute resolution service
  • your (or your letting agency’s) name and contact details
  • the name and contact details of any third party who paid the deposit
  • why you would keep some or all of the deposit – eg because your tenants damaged the property and you need to fix it
  • how to apply to get the deposit back at the end of the tenancy
  • what to do if they can’t get hold of you at the end of the tenancy
  • what to do if there’s a dispute over the amount of deposit to be returned at the end of the tenancy

This information is prescribed by law so you if you fail to provide this then you will be in breach of the regulations. Each of the deposit schemes have a template you can use which is available via their website.

The Housing (Tenancy Deposits) (Prescribed Information) Order 2007
Section 30 Deregulation Act 2015

Clarifications as per the Deregulation Act 2015
The Deregulation Act 2015 has been introduced to help clarify some of the requirements around protecting deposits, particularly for those taken before 6 April 2007 when the initial legislation commenced. This new legislation in relation to tenancy deposits came into force on the 26 March 2015, and was introduced following the Court of Appeal judgement in the case of Superstrike vs Rodrigues.

The key deposit protection changes affecting landlords and letting agents are:

  • Deposits taken before 6 April 2007, for tenancies which have subsequently moved onto a periodic tenancy on or after this date, now need to be protected in a tenancy deposit protection scheme if the tenancy is still running. Landlords had until 23 June 2015 to protect the deposit or they would be in breach
  • For deposits taken before 6 April 2007, where the tenancy became periodic before this date, landlords are not required to protect the tenant’s deposit. However, landlords won’t be able to serve a section 21 notice to regain possession of a property unless the deposit is protected (or returned).
  • If a tenancy is renewed or rolls over on a periodic basis, landlords don’t need to reissue Prescribed Information to a tenant if the deposit remains with the same authorised scheme, and the parties and premises remain the same.
  • The legislation has also clarified that the reference to ‘the landlord’ within the Prescribed Information includes those acting on behalf of the landlord, such as letting agents.

 


Breach of The Rules

If you fail to comply with your legal obligations, there are two possible sanctions:

  1. You cannot end the tenancy or regain possession of your property under section 21 of the Housing Act 1998 until the deposit has been repaid or a court case has ended.
  2. Your tenant can apply to a County Court to receive compensation between once and three times their deposit’s value if:
    • they think their deposit is not protected
    • they’ve not received information about the scheme you protected their deposit with.

Your tenants can apply to a county court if you don’t use a tenancy deposit protection scheme when you have to. They can do this at any time during the tenancy. If the court finds you haven’t protected the deposit, it can order you to either:

  • repay it to your tenants
  • pay it into a custodial scheme’s bank account within 14 days
  • The court may also order you to repay your tenants up to 3 times their original deposit within 14 days of making the order.

Section 214 Housing Act 2004 – Proceedings relating to tenancy deposits

What is the remedy so I can serve a section 21 notice?
You cannot use Section 21 to end the tenancy, unless one of the following things has happened:-

  • You return the deposit in full to the tenant/s (documentary evidence required), or,
  • You agree with the tenant/s that you can make deductions from the deposit and you return the remainder to them (any such agreement should be in writing), or
  • You are ordered to pay the penalty by the Court. This must be done through a Court order not by private agreement as a private agreement to pay a penalty is not enough for this purpose. You could agree through the court on the amount for the penalty for that purpose. This is usually in response to a claim made by the tenant against the landlord so would usually be instigated by the tenant rather than the landlord.
  • If you have protected the deposit but not given the prescribed information with 30 days the position is different. You lose your Section 21 rights at any time when the information (and the tenants leaflet) has not been given, but you can regain your Section 21 rights by giving the prescribed information (and the tenant/s leaflet) to the tenants/s and anyone else who has paid towards the deposit. However, you will still have to pay a penalty if the tenant/s claims it. Once you have done one of the above you can serve a section 21 notice.

Where a deposit taken for an assured shorthold tenancy before the 6 April 2012 but after 06 April 2007, the landlord or agent would have needed to protect the deposit within 30 days of 6 April 2012. If the deposit was not protected within that 30 day period the deposit would be subject to the above remedy requirements.

Section 31 Deregulation Act 2015

Returning the Deposit by Credit to the Rent Account or for Agreed Damage
You cannot simply ‘tell’ the tenant that you are using the deposit for rent as the account is in arrears, nor can you ‘tell’ the tenant that you are using it for damages that you feel are appropriate. If you are to use the deposit money for either of these issues it must be by consent of the tenant/deposit payer. You must get the agreement in writing and signed by the tenant/deposit payer. If the tenant has agreed to it in a text message or email then this is an alternative method of agreement, however this method is not as safe as in writing with a signature. We have a form in the documents section for this.

Returning the Deposit in Full
Whatever method of returning the money you choose you will need to write to the tenant to confirm what the money is for or get them to sign the above deposit return confirmation. If you simply give them the money without confirming what it is for then you cannot have ‘returned the deposit’, you have instead just ‘given’ them money. Some of the methods you could use to return the money:

  • By bank transfer – If you have the tenant/deposit payers bank details then you can simply return the monies by bank transfer and take a screen print from your online banking or a copy of your bank statement of the proof of this.
  • By Cheque – This requires the tenant to cash it for it to be returned as is arguable to whether or not the return happened by simply just giving a cheque. You should keep checking your account to see when it cleared.
  • By Cash- If you use cash you should get the tenant to sign for it as received as there is no proof without it.

Returning a Deposit Held in the DPS Custodial Scheme 
If the money is protected with the DPS and held by them in the custodial scheme account then you can request this to be returned via the online system. You can agree deductions or return the full amount using this system.

 


The Schemes

The Deposit Protection Service Custodial Scheme (DPS)

About the Scheme
Whether you’re a letting agent, landlord or organisation, the Custodial scheme is available for you to use. This service is free so you won’t need to worry about membership fees or any other costs, which is why it’s the most popular choice for letting agents/landlords. Your tenant’s deposit is protected from the moment it’s submitted, to the end of the tenancy. Any funds you submit to them are protected.

Contact Details:
Website: https://www.depositprotection.com
Address: The Deposit Protection Service, The Pavilions, Bridgwater Road, Bristol, BS99 6AA
Phone: 0330 303 0030

The Deposit Protection Service Insured Scheme (DPS)

About the Scheme:
The service is competitively priced and is available on a ‘fee per deposit’ basis. You don’t have to worry about paying a registration or annual renewal fee. You’ll retain the deposit and the scheme will protect it for the duration of the tenancy. If you’re a letting agent, you’ll need to be a member of, associated with, or accredited by one of the following bodies: RICS, ARLA, NAEA, NALS, UKALA or The Law Society. You’ll also need to set up a monthly direct debit to them. If you’re a letting agent, you may be entitled to volume discounts.

Contact Details:
Website: https://www.depositprotection.com
Address: The Deposit Protection Service, The Pavilions, Bridgwater Road, Bristol, BS99 6AA
Phone: 0330 303 0030

The Tenancy Deposit Scheme (TDS)

About the Scheme:
Tenancy Deposit Scheme (TDS) is a government approved tenancy deposit protection scheme in England and Wales operated by The Dispute Service Ltd. The Dispute Service is an industry owned, not for profit company. TDS is an insurance backed scheme. This means the agent or landlord holds the deposit during the tenancy and the money is covered by their insurance. Deposits are only ever sent to them when they are asked to adjudicate in a dispute.

Contact Details:
Website: https://www.tenancydepositscheme.com
Address: Tenancy Deposit Scheme (TDS), PO Box 1255, Hemel Hempstead, Herts, HP1 9GN
Phone: 01844 262 891

MyDeposits Insured Scheme

About the Scheme:
This is an insurance-based scheme. Landlords can join the scheme and pay a fee to protect the deposit. This enables the landlord to hold it for the duration of the tenancy and then return the agreed amount to the tenant at the end. They offer a free and impartial Alternative Dispute Resolution service if you cannot agree how much of the deposit is to be returned to the tenant.

Contact Details:
Website: https://www.mydeposits.co.uk/
Address: 1st Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire, WD6 1JH
Phone: 0333 321 9401

MyDeposits Custodial Scheme

About the Scheme:
This is a free service similar to the one offered by the DPS. This service is free so you won’t need to worry about membership fees or any other costs, which is why it’s the most popular choice for letting agents/landlords. Your tenant’s deposit is protected from the moment it’s submitted, to the end of the tenancy. Any funds you submit to them are protected.

Contact Details:
Website: https://www.mydeposits.co.uk/
Address: 1st Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire, WD6 1JH
Phone: 0333 321 9401

 


The End of The Tenancy

Returning the Deposit
The deposit must be returned to your tenants within 10 days of you both agreeing how much they’ll get back. If you’re in a dispute with your tenants, the deposit is protected in the deposit scheme until the issue is settled.

Agreement Reached Between Landlord and Tenant (for custodial schemes)
If the landlord and tenant meet to discuss the deposit repayment at the end of the tenancy and a mutual agreement is made then you would both agree to this via the Joint Deposit Repayment Process which is either online or via a paperbased form. The money is then distributed as mutually agreed by the scheme.

Tenant Uncontactable (for custodial scheme)
If the tenant is uncontactable for over 14 days after the end of the tenancy and you (the landlord) wish to make a claim for some or all of the deposit to be repaid to you then you must start the single claim process. The scheme will send out a Statutory Declaration to you and you must complete the Declaration and send it back to the scheme, stating the amount and reason/s for which you are claiming; this must be witnessed by a Solicitor, Commissioner for Oaths or Magistrate. The cost is fixed by the Commissioners for Oaths (Fees) Order 1993 (http://www.legislation.gov.uk/uksi/1993/2297/article/2/made) at £5 per affidavit and £2 per attachment. Just call a local firm and ask when you can go. The scheme checks that the Declaration has been completed correctly and if it has they will serve notice on the tenant. If there is no response within 14 calendar days the claimed amount is returned to you. If the tenant disagrees, they must complete the notice and send it back to the scheme within 14 calendar days. A summary of the notice is sent to you stating that the claim has been rejected. You then then have 7 calendar days to accept or disagree with contents of notice and submit any evidence. If no response is received from you the case is referred to the Alternative Dispute Resolution (ADR) service. If a response is received from you stating that you disagree, the scheme will send the Statutory Declaration, the Statutory Declaration Notice and the additional evidence to the Alternative Dispute Resolution (ADR) service.

Alternative Dispute Resolution Service (ADR)
Alternative Dispute Resolution is a way of resolving deposit disputes at the end of a tenancy, rather than using the traditional route of the Courts. In the event of a dispute arising, the decision about who should receive the deposit is made by an impartial qualified adjudicator. The adjudicator will make their decision in an unbiased way, based on the evidence each party provides. You’ll be required to submit evidence, which can include; photographs, inventories, invoices and/or other relevant information. You’ll need to supply this within a specified timescale. The adjudicator will consider all of the evidence submitted and decide how the deposit should be distributed. The more evidence you can collect the stronger your case will be. The deposit remains the property of your tenant until you have successfully claimed all or part of it. You and your tenant must consent to using the Alternative Dispute Resolution service before the scheme can review the case. If the deposit is protected with a custodial scheme then this money will continue to be held until the dispute is resolved. If it is protected with an insured scheme it will have been held by you so the scheme will ask you to lodge the money with them pending the results of ADR. Once the decision has been made the scheme will repay to each party the amount to which they are entitled.

You and the tenant will complete a Joint Deposit Repayment form (name varies depending on the scheme provider) and have requested to use the Alternative Dispute Resolution (ADR) process. The scheme will send you the an Evidence form to complete, to support your claim. This must be returned to scheme within 14 calendar days. When the scheme receives the form with the evidence they will send a summary to the tenant. The tenant must fill in a Tenant Evidence form. This must be returned to the scheme within 14 calendar days. A summary of the tenant’s evidence is sent to you and you are given a further 7 days to submit further evidence. The case is then referred to the Alternative Dispute Resolution service. The adjudicator’s decision is based on the evidence supplied and is binding for both parties. Both parties are notified of the decision and the deposit is paid back accordingly.

Claim via the Courts
The ADR process is a free alternative to the normal county court legal system process but it does not replace it. At any point either party can take the case to court instead. If either party decides to take the case to court the deposit protection scheme must be informed. After the case has been judged by the court an order will be made and a copy of the court order will need to be sent to the scheme so they can distribute the money accordingly. You must apply to court within 6 months of the issue commencing commencing otherwise the ADR will automatically consider the repayment based on whatever information they have been provided to date by the tenant and/or yourself. So, neither you or the tenant can leave it for years without a solution, there is a time limit.

Third Party Debt Order
If you have ended the tenancy by way of a claim for possession via the county court, then you may have been awarded a money order for court costs and/or rent arrears. If that order was made without it mentioning that the debt should be allowed to be deducted from the deposit then you will need to apply to the court for a third party debt order before the scheme can allow for the deduction. So the best way is asking at the same time as filing your claim for possession rather than having to make a separate application after. If it is a rent arrears claim for possession then you can make the request during the court hearing even if you have not included it in the initial claim papers, it is then up to the judge to whether or not they will allow it. You would be aiming for the order to say something along the lines of:

“Costs and rent arrears be allowed to be deducted from the deposit protected with the XX scheme under reference XXX forthwith.”

If you have not done this then an application for a third party debt order needs to be sent to the county court. Likewise if you have used the Money Claim Online process to gain an order for the rent arrears you can apply to enforce this money judgement by way of deducting it from the deposit amount using a third party debt order.

Application for a Third Party Debt Order
Guide – How Do I Apply for an Order?

 


Please note this page provides general guidance which we believe to be accurate at the time of being published. You should however seek individual advice from either the deposit scheme and/or a legal adviser to ensure the information applies to your circumstances.