‘Tenancy Deposit Schemes’ were formed through the Housing Order of year 2007, which is an amendment to schedule 10 of the 2004 Housing Act. Under this legislation, all landlords have to transfer deposits that are part of an assured short hold tenancy into a ‘tenancy deposit scheme’.
This was introduced to stop landlords from unfairly keeping their tenants’ deposits at the end of the tenancy period. The Housing Order of 2007 was made to give security and protection to tenants’ deposit. Depositing in a tenancy deposit scheme can also be an advantage to landlords. If a certain dispute arises, the scheme can provide a mediation service, and setting a deposit with a scheme delivers a certain piece of mind that the money is safe.
There are two kinds of tenancy deposit scheme; an insurance-based scheme and a custodial scheme. If you hired a letting agent, let the agent take care of the necessary arrangements with the tenancy deposit scheme.
Insurance-based Deposit Scheme
This is a deposit scheme where a landlord pays a certain amount of fee into the scheme, which will insure against the unlawful retaining of the tenants’ deposit at the end of a tenancy period.
It also offers a disputes service. Once a deposit fee is paid back, the landlord notifies the scheme that protection for the deposit fee is no longer required. The payment to the insurance-based deposit scheme is intended to be absorbed into the landlord’s expenses, but there’s no stopping the landlord from passing on the fee to their tenant.
There are kinds two insurance-based schemes:
- Tenancy Deposit Scheme – which is available only to letting agents and landlords who belong to a professional trade association
- MyDeposits – which is funded by the National Landlords Association and is managed by Hamilton Fraser Insurance Services
Custodial Tenancy Deposit Scheme
This is a scheme where the landlord pays the agreed deposit amount through the assured short hold tenancy, into the Government selected custodial deposit organization.
The Deposit Protection Service or DPS is a free service financed by the interest earned on deposits. The interest can also be paid out to the landlord or the tenant if they are owed part of the deposit as a result of certain damages on the property.
This custodial scheme then gives back the deposit amount once the landlord and the tenant agree on how it should be properly allocated. The Deposit Protection Service also has a disputes service on instances wherein the landlord and tenant cannot settle.
Table Of Contents
- Landlords Home Letting guide Intro
- Responsibilities Of A Landlord
- Landlords and Houses In Multiple Occupation
- Letting A Room In Your Own Property
- Contracts With The Tenants
- Pros And Cons Of Hiring A Letting Agent
- Landlord Letting Insurance
- Tenancy Deposit Schemes
- Evicting Tenants
- Difficulties That May Arise With Tenants