tenancy deposit scheme

The Government’s Tenancy Deposit Scheme (TDS) came into force on 6 April 2007. From this date all deposits taken by landlords for Assured Shorthold Tenancies (AST) in England and Wales must now, by law, be protected by a tenancy deposit protection scheme. Whilst it is not law for a deposit to actually be taken, whenever one is taken, tenants are to be advised of the details of the scheme selected by the landlord (or agent) when signing a new tenancy agreement.

Existing tenancies (those which commenced before 6 April 2007) are not affected, nor are periodic tenancies which run on after that date. However, a tenancy that commenced prior to 6 April 2007, but is renewed after that date whereby a new AST agreement is signed, will be affected.

Three companies have been contracted by the Government to run schemes:-

1. The Deposit Protection Service (DPS) – run by Computershare Investor Services plc – providing the only custodial scheme. The tenant pays the deposit to the landlord or agent who pays it into the DPS within 14 days of receiving it. The DPS then provide confirmation and details of the scheme to both the landlord/agent and the tenant. This scheme is free of charge for landlords and agents, being paid for by the interest earned on the monies deposited into the scheme fund.

At the end of the tenancy, the landlord/agent and the tenant agree the repayment of the deposit and inform the scheme. The agreed amounts are paid to each party within 10 days.

If there is a dispute, the DPS’s administrators return any undisputed amount to the relevant party but hold the disputed amount for adjudication by either the Alternative Dispute Resolution (ADR) service (run by the Chartered Institute of Arbitrators), or the courts. The ADR will make an adjudication within 28 days of the scheme receiving the necessary evidence, but both parties have to agree which course of action to follow.

Further information can be obtained from:- The Deposit Protection Service. The Pavilions, Bridgwater Road, Bristol, BS99 6AA. Tel: 0870 7071 707 www.depositprotection.com

2. Tenancy Deposit Solutions Ltd (TDSL) – a company jointly owned by the National Landlords Association (NLA) and Hamilton Fraser Insurance (HFIS plc) – providing one of the two insurance-based tenancy deposit protection schemes.

The scheme is sponsored by the NLA and administered by Hamilton Fraser Insurance; a company authorised and regulated by the Financial Services Authority. It is available to both agents and landlords and any landlord resident in the UK (excluding the Isle of Man) can apply to join the scheme. Membership of any trade body or professional organisation is not necessary to join, but concessions are available for members of the NLA or recognised professional associations for agents.

An insurance-based scheme is a membership scheme allowing the landlord to continue to hold any deposit taken from a tenant, during the period of the tenancy. The landlord will be required to pay a fee to the scheme to protect the deposit. If there is a dispute over the return of the deposit at the end of the tenancy, the scheme, supported by an insurance policy, will ensure that the amount the tenant is entitled to is returned to them. The scheme will recover the disputed amount from the landlord as necessary.

This scheme is also required to provide an Alternative Dispute Resolution (ADR) service which is provided free of charge to all parties.

Further information and fees can be obtained from:-Tenancy Deposit Solutions Limited. 3rd Floor, Kingmaker House, Station Road, New Barnet, Hertfordshire, EN5 1NZ. Tel: 0871 703 0552 www.mydeposits.co.uk

3. The Dispute Service (TDS) – an independent, not-for-profit company established in 2003 to resolve complaints and disputes arising in the private rented sector speedily, cost-effectively and fairly – providing the second insurance-based tenancy deposit protection scheme. This scheme has already been running for about a year and again is for use by both agents and landlords.

Further information and fees can be obtained from:- The Dispute Service Ltd. PO Box 541, Amersham, Bucks, HP6 6ZR. Tel: 0845 226 7837 www.tds.gb.com