Tenancy deposit scheme

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Information about the tenancy deposit scheme

Insured propertyAfter the success of the property licence, the government are looking to launch another new scheme to provide protection for tenants in the UK. The basic idea of the tenancy deposit scheme (TDS) is to provide tenants with protection from landlords who without justification do not refund the deposit after the termination of a lease agreement. The government consider that this type of action is damaging the image of the private rented sector. The new regulations will make it compulsory for all landlords which collect a deposit to adhere to the TDS rules.

Carefull thought has been put into this scheme and to make sure landlords do not avoid complying with regulations, the government have expanded the term 'deposit' meaning that ANY money collected will be considered as a deposit for the purposes of the TDS.

The TDS will be run be scheme administrators and not by the government themselves although the government will closely monitor the schemes to ensure they are being ran correctly and fairly. A landlord will not legally be allowed to collect a deposit unless they are to be covered by a TDS.

There will be two types of schemes available for the landlord to choose from, custodial and insurance.

Custodial scheme

The tenant will pay a deposit to the landlord which will then be passed on in full to the scheme administrator who will hold the money in a specific account until the tenancy has ended. The landlord will earn interest on this money at a rate set by the government and any interest earned above this will be kept by the scheme administrator. At the end of the tenancy both the landlord and tenant will need to notify the scheme admin. of how the deposit should be returned and if there is any dispute over this the money will be retained until either party has a final court order stating how much each person is entitled to. Upon an acceptable notification the money should be returned within 10 days.

Insurance based scheme

Under this scheme the landlord will retain the full deposit and will only transfer the money into a TDS if there a dispute once the tenancy ends, the scheme will then hold onto the deposit until the dispute has been settled as described above. Under this scheme the TDS will have to pay the tenant even if the landlord has not passed the money onto them, this cost will be covered by the cost of the insurance premium charge for those using the scheme.

The choice of which scheme the landlord uses is completely theirs and cannot be influenced by the tenant. Failure to follow the regulations set out by the TDS within 14 days of collecting a deposit will allow the tenant to obtain a court order which forces the landlord to pay back a deposit of three times the amount originally paid.