As of 6th April 2007 the way in which deposits are held for Assured Shorthold Agreements will change.

By law a landlord will have to lodge the deposit with a scheme that has been approved by the Government. Failure to do so could lead to serious penalties as set out at the end of this briefing.

The three schemes are as follows:

*The Deposit Protection Service:
This service we believe is probably the better one of all three as it is free to use and although you have to send them the deposit, any monies that are deducted from the original sum will earn interest for you.

*Tenancy Deposit Solutions Ltd:
This scheme is an insurance based scheme and as such costs the landlord money to not only have them insure the deposit but also an annual membership fee is payable whilst they hold the deposit. Their fees are: £58.75 for joining, £30.00 per deposit and £14.75 annual membership renewal. Although you get to keep the deposit you are still having to pay which is somewhat unfair on the landlord and also the tenant if the landlord decides to pass on the charge.

*The Tenancy Deposit Scheme:
Quite frankly this is the most confusing of all the schemes and it appears that they will charge a Landlord in the region of £95.00 a year. However, they do not make it at all clear as to what any other charges may be made if any.

The system will work as follows:
At the beginning of the tenancy the tenant will in most cases pay a deposit to the landlord who must then ensure that it is protected. Where the landlord chooses to use the custodial scheme (free of charge) he/she will simply send the deposit to the scheme at the beginning of the tenancy. Where the landlord chooses to use an insurance based scheme the landlord keeps the deposit and pays a fee to the scheme providers.

Within 14 days of taking the deposit, the landlord mustprovide the tenant with the following details regarding the deposit:

The contact details of the tenancy deposit scheme selected.

The landlord's contact details.

How to apply for the release of the deposit.

Information explaining the purpose of the deposit.

What to do if there is a dispute about the deposit.

At the end of the tenancy the landlord and tenant should agree as to whether any deductions are necessary and apply for the release of the deposit from the scheme. The tenant should have the agreed sum returned from the scheme within 10 days.

It is unfortunate on the tenants that the people who thought of the scheme did not take into account that many tenants use their deposit as a deposit on the next property - nor can the tenant have any say as to which scheme should be used - it is totally up to the landlord.

In the event of a dispute and no agreement being reached as to how the money should be divided up then the scheme holding the deposit will provide a free resolution service. The disputed amount will be held until resolution.

Failure to comply carries the following penalties:Where the landlord does not inform the tenant of the whereabouts of the deposit, the tenant can apply to the local courts. The courts can then order the landlord to either repay the deposit or get it protected. If the courts wishes are not carried out within 14 days the landlord will be ordered to repay three times the amount of the deposit to the tenant within 10 days. Futhermore where the deposit has not been protected the landlord can not evict the tenant using a Section 21. Therefore, by not securing the deposit you will not be able to get your house back and face a large fine.

Inventory:
This is going to be a vital document that should be drawn up by professional inventory clerks. For more information on inventories, please click here. We are curerntly putting together a list of inventory clerks that you can contact.

Not an Assured Shorthold Tenancy:
Where your tenancy agreement is not an Assured Shorthold Tenancy the Tenancy Deposit Scheme does not cover you and you will continue to take deposits as you did before.

Guarantors:Some landlords plan to get around the Tenancy Deposit Scheme by simply not taking deposits. This is a practice that we ourselves often use for our student lets. The idea is simple, instead of taking a deposit you get a letter of guarantee from the parents, agree the inventory with them and at the end of the tenancy agree the check out with them. The guarantor has made a formal promise to reimburse you for any breakages, non payment of rent and bills and of any unnecessary wear and tear. For a comprehensive list of inventory clerks, please click here.

To view an update on deposits please click here.

Tenancy Agreements:
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Choosing An Agency:
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Tenancy Letters:
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