Tenancy Deposit Regulations

The Housing Act 2004 introduces the biggest changes to the lettings process that the Private Rental Market has seen for sometime. The new legislation has left many landlords, and tenants, confused and worried.

Here at homes4u we are committed to making the lettings process as easy and stress-free as possible. For our Managed Properties, we’ve made handling the new rules as simple as possible. Read on for the second in our series of straight-forward updates on the key legislation news…. 

click thru to see July's article on HMO Licensing »


This month… Tenancy Deposit Regulations

Exactly one year on from the introduction of the HMO legislation, the Housing Act 2004 regulations on how landlords handle the deposits that they receive came into affect.

As of 6 April 2007, all new deposits under £25,000 taken by landlords and letting agents on Assured Shorthold Tenancies must be protected by a government-authorised tenancy deposit protection scheme. So if you are taking deposits of larger amounts, or are involved in company, holiday or commercial lets, the rules do not affect you. However, for the majority of private landlords, the new rules mean a big change in the lettings process. And this affects private tenants too, but many are not sure how, or if, it affects them.

The government has awarded contracts to three companies to run its tenancy protection schemes:

• The Deposit Protection Service (The DPS) - the only custodial deposit protection scheme – is free to use and open to all Landlords and Letting Agents. The service is funded entirely from the interest earned from deposits held. Landlords and Letting Agents can register and make transactions online. Paper forms are also available should internet access be an issue. The scheme is supported by a dedicated call centre and an independent dispute resolution service. For more information, visit www.depositprotection.com or call 0870 707 1 707

• Tenancy Deposit Solutions Ltd (TDSL) is a partnership between the National Landlords Association and Hamilton Fraser Insurance. This insurance-based tenancy deposit protection scheme enables landlords, either directly or through agents, to hold deposits. Letting agents can also join the scheme. For more information, visit www.mydeposits.co.uk

• The Tenancy Deposit Scheme (TDS) is an insurance-backed deposit protection and dispute resolution scheme run by The Dispute Service that builds on a scheme established in 2003 to provide dispute resolution and complaints handling for the lettings industry. The new scheme enables letting agents and landlords to hold deposits. For more information, visit www.tds.gb.com or call 0845 226 7837.

Landlords must provide their tenants with the following information within 14 days of receiving the deposit (not from the start date of the tenancy):

  • The contact details of the scheme in which the deposit is protected, including name, address, telephone & fax numbers, as well as e-mail address.
  • Your contact details, as above.
  • Information on the purpose of the deposit.
  • Information on how to apply for the return of the deposit.
  • What to do in the event of a dispute. 

For further details: Statutory Instrument 2007 No. 797 The Housing (Tenancy Deposits) (Prescribed Information) Order 2007. Crown Copyright 2007


Why?
To ensure that tenants’ money is being properly held, and that they can be sure that they will get it back at the end of the tenancy when they are entitled to, and that it is not being unfairly withheld. This in turn should reduce the number of disputes over deposit refund, and improve procedures and standards in the industry.

Well, that is the reason that the legislation was introduced. But why should landlords observe the rules?
Apart from following best practice, and the law, not following the legislation can involve serious penalties: 

If the deposit has not been protected, and the tenants notified of the required info within 14 days, the landlord loses the right to regain possession through ‘notice only’ grounds, i.e through issuing a Section 21 notice

In addition, if the tenants believe that their landlord has not protected their deposit, they can apply for a court order to have the subscribed information given to them. If the court finds that the landlord has not protected the deposit, they will order the landlord to either protect the deposit within 14 days, or to return the deposit to the tenants. And in addition, they MUST order the landlord to pay a fine to the tenant of THREE TIMES the amount of the deposit, and within 14 days.

Common Questions
□ Do the rules apply to student accomodation? Yes- the exception is in university controlled halls, where an AST is not used. 

□ If someone other than the tenant pays the deposit (ie parent) does it have to be protected? Yes

□ What about with overseas students? How will the money be refunded? All of the schemes will refund monies to non-UK bank accounts, at a cost which will be charged to the tenant. Their deposits still need to be protected.

□ Do deposits paid before April 6th have to be protected? No, only new deposits

□ Can part deposits be protected? No, only the whole deposit for the whole property. Which means that where there is a group of tenants, it can’t be protected until all have paid.

Take into account…

□ Tenants will need to complete the tenancy process quickly, so that the landlord will have all the required information and paperwork in order to protect the deposit within 14 days of receipt.

□ Ensure that a full-inventory is prepared at move in, and that both landlord and tenant check it against property contents and condition. Both parties should a copy, and tenants should use it to check the property before leaving, ensuring that everything is as they found it. This will minimise disputes. Taking date stamped photos of any damage when at move in is also a good idea for both tenant and landlord.

□ Undisputed deposit monies should be refunded as soon as possible after the end of tenancy, but no later than ten days after either the tenant has requested it for insurance based schemes, or both parties have applied for refund in the case of the custodial scheme. Where there is a dispute, which cannot be resolved by the parties involved, the disputed money must be refunded no later than 10 days after the Alternative Dispute Resolution Service orders the return.
Alternative Dispute Resolution Service

This has been set up as an independent body to mediate and resolve in the event of a dispute between tenant and landlord over the deposit. Both parties have to agree to use the service. It is free for tenants and landlords to use. For Landlords who have insured the deposits, the will have to pay the disputed amount over to the ADR Service within 10 days of them becoming involved, and they will rule on the refund. The remaining uncontested amount should already have been refunded to the tenant. If a landlord does not comply when ordered to refund, the service will pay the money over to the tenants, and the re-coup the money from the landlord, if necessary via the courts.

More information is available from the relevant deposit scheme.

How homes4u is managing the changes…
□ We inform all tenants who pay deposits through us what information they are entitled to, and who is responsible for providing it.

□ With our managed properties, the prescribed information is always provided to the tenants.

□ We complete full inventories on managed properties, at start and end of the tenancy, and take photographic evidence of any damage or required cleaning.

□ We provide clear guidance notes for our tenants on moving-in and out, highlighting what may be deducted, and how to ensure that this won’t be necessary, and also stating how to go about getting their deposit back

□ We handle the process fully for our managed landlords to minimise void periods, and ensure that the property is ready for re-let.

download leaflet here

Next month…future proofing- new legislation which will affect the lettings process…


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