What is the Tenant’s Deposit Scheme?
Posted on 04/02/10, filed under Land | No CommentsTenants in the private sector normally give their landlords a deposit against possible non-payment of rent or damage to property. When a tenancy comes to an end, there is usually no disagreement about the return of the deposit.
But sometimes there is and this can cause much hardship and inconvenience to both landlord and tenant. The Housing Act 2004 (Chapter 4,sections 212-5;& Schedule 10) made provision for both the protection of tenancy deposits and the resolution of disputes over their return. The Government has awarded contracts to 3 companies to run tenancy deposit schemes. The legislation came into effect on 6 April 2007. After that date all deposits taken for Assured Shorthold Tenancies will have to be covered by a tenancy deposit protection scheme.
The new legislative requirements:
• Any landlord or agent who takes a deposit from a tenant for an Assured Shorthold Tenancy must safeguard it in an approved tenancy deposit scheme…
• …and the tenant must be told which one.
• The deposit must be in money.
• Landlords in breach of these provisions will not be able to issue S 21 notices, and may have to pay the tenant compensation of three times the deposit.
• The landlord/agent must submit the deposit to the operators of their scheme when requested to do so.
• Each scheme must have procedures for resolving disputes without going to court.
• There are strict time limits for the return of the deposit if there is no dispute.
• The Act allows for both custodial and insured schemes. Custodial schemes are
where the deposit is lodged with an independent third party i.e. outside the control of the landlord. Insured schemes allow the landlord/agent to retain control of the deposit as long as they are subject to suitable insurance arrangements.
• Secondary legislation will fill out the detail, including time limits for dealing with disputes.
The Tenant Deposit Services
Tenant Deposit Services have been developed to ensure that the deposits are protected and that disputes about their return are resolved swiftly, inexpensively and impartially.
Under the Tenant Deposit Services:
• deposits will be protected during the tenancy
• where there is no dispute at the end of the tenancy, deposits will be returned promptly
• where there is a dispute about the return of the deposit it will be dealt with fairly by the Independent Case Examiner (ICE)
• the ICE will make his decision quickly and the deposit will be paid out without unnecessary delay.
How are the deposits held and protected?
The member firm holds the deposit in a special client account. In most cases the tenant and the landlord will decide between them, assisted by the agent if one has been involved, how the deposit should be allocated. If there is a dispute, the landlord or agent has a couple of weeks to resolve it. After that, any of the parties – landlord, agent or tenant – can approach the ICE. He will
appoint an adjudicator to assist him in considering the evidence they provide, and will aim to issue his decision within 15 working days of receiving all the necessary papers.
There’s a dispute - what happens to the deposit?
The deposit is held in a secure account until the dispute is resolved. It will then be paid out according to the instructions of the ICE following his award.
Resolving disputes…
• You have 20 working days to raise a dispute and the Member has 10 working days to resolve it.
• If not, you decide if you want to go to court, or to have the ICE deal with it – which is what most people prefer.
• Contact the Tenancy Deposit service where the deposit is registered and ask for advice
• Whoever is holding the deposit must send the amount in dispute to the ICE.
• The ICE will copy the details of the dispute to other party, asking them to tell him within 5 working days if they intend to challenge it. They have a further 5 working days to send in their side of the story i.e.10 days altogether.
• The ICE will appoint an adjudicator to assist him, with a view to issuing an Adjudication within 15 working days of receiving all the necessary paperwork.
• The disputed amount will be paid out in accordance with the adjudication within a further 10 working days.
Why is using Alternative Dispute Resolution better than sending disputes to court?
Deposit disputes need to be resolved quickly and cheaply. Tenants usually need the money as a deposit on their next property and landlords need to know how much will be available to spend on redecoration and repair. Going to court takes time and can be expensive and stressful.
Successful adjudication is based on an expert assessment of documentary evidence (which can also include photographs and video).
