Tenancy Deposit Schemes
There are three deposit protection schemes in England and Wales. All three of them offer both a custodial and an insured scheme:
• Deposit Protection Service (‘TDS’);
• Tenancy Deposit Scheme (‘DPS’); and
• MyDeposits.
How long to protect
Deposits must be protected within 30 days of receipt from the tenant on an assured shorthold tenancy. Within that same 30 day period, the landlord is also required to provide the Prescribed Information to the tenant and any relevant person.
You do not have to protect a ‘holding deposit’ which is intended to just secure the property. However, if some of that ‘holding deposit’ becomes a tenancy deposit then you have 30 days from the day that it moves over to protect the deposit and serve the Prescribed Information.
Prescribed Information and Relevant Person
All 3 schemes provide the landlord or agent with template Prescribed Information. The Prescribed Information is designed to ensure that the tenant and or Relevant Person is aware of where their deposit is held and protected and how they can get their deposit back at the end of the tenancy. The Prescribed Information templates include information such as:
• The amount of deposit paid;
• Name and contact details of the scheme and its dispute resolution service;
• Name of the Landlord/ Letting agent’s contact details;
• Name and details of any Relevant Person;
• Under what circumstances the deposit may be withheld;
• How to apply to receive the deposit back at the end of the tenancy; and
• Steps to take in the event of a dispute over the deposit at the end of a tenancy.
A ‘Relevant Person’, is anyone (including companies or organisations) who pays the deposit on behalf of the tenant. It is therefore very important for the agent or landlord to establish who will be paying the deposit and ensure that the prescribed information is served on that person. It is also recommended that the agent or landlord clearly advises in writing, that irrespective of who pays the deposit at the outset, at the end of the tenancy it will be returned to the tenant.
What if I haven’t protected the deposit or done it too late?
Landlords or agents will face a penalty of not less than the sum of the deposit and up to 3 times the deposit amount where they have:
– Failed to protect the deposit;
– Failed to protect it within the stipulated 30 days; and/or
– Failed to provide the tenant and/or Relevant Person with the Prescribed Information within the 30 days or at all.
Where the deposit is improperly protected, the Landlord will also not be able to rely on any Section 21 notice that is served to regain possession. The Section 21 will automatically be invalid on service.
Where there is an improperly protected deposit, the best course of action is usually for the landlord or agent to return it to the tenant as soon as possible and retain any evidence of its return. This will not prevent a claim for financial penalties being made but will at least allow recovery of possession of the property.
