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Landlords and Letting agents from 6th April 2007 were required by Law to register a tenants deposit/bond within an approved scheme. This introduction of the new Tenancy deposit Law was to ensure that bonds where held appropriately and that at the point of it needing to be returned there was support for both parties to govern a full or partial return of the deposit. It very much encourages tenants and landlords making a clear agreement at the outset of any tenancy relating to the condition of the property etc.
There are two basic types of protection schemes to choose from (insurance based schemes and custodial schemes).
The Insurance based schemes allow the Landlord/Agent to retain the deposit and pay an insurance premium to their provider.
The Custodial Scheme means the deposit is paid in to a central fund and so does not retain the deposit. This is the fundamental difference between the 2 schemes. The interest on this scheme is generally retained to cover the ongoing management costs.
Landlord/Agent requirements
The landlord or Agent must do the following within 14 days of receiving the deposit
- The contact details of the Tenancy Deposit Scheme selected
- The Landlord or Agents 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
There are currently 3 approved providers of tenancy deposit protection. 2 of them are insurance based scheme and there is currently only 1 custodial scheme.
Formerly referred to as the TDSL (Tenancy Deposit Solutions Ltd), mydeposits.co.uk is one of the insurance based schemes. They offer a simple and affordable option for both landlords and agents to join. It is a pay as you go system and offers and easy solution for landlords wishing to retain the deposit for the duration of the tenancy. Mydeposits.co.uk is jointly owned by the National Landlords Association.
The dispute service is also an insurance based scheme and is open to landlords and regulated letting agents only. Its costs vary but broadly speaking it is probably more cost effective for people issuing a larger number of tenancies per year. Again it allows the landlord/agent to hold the deposit
The Deposit Protection Service (DPS)
The DPS is the only custodial service and is free to use for all landlords and letting agents. Online registration is required and you can start making deposits immediately. Unlike the other schemes the deposit must be lodged with the DPS and the scheme is funded entirely by the interest earned on the pooled deposits.
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