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Anyone who decides to rent a property from a private landlord is usually required to pay a security deposit upfront. This deposit will be retained by the landlord until the tenancy is terminated. In the majority of cases the landlord will return the deposit without any problems once the tenancy ends: unfortunately there are occasions when this doesn’t happen. The landlord may retain some of the money to pay for unpaid rent, damage to the property or unpaid bills. There was a time where any ongoing disputes about rental deposits had to be resolved by a court. However, this proved to be too time-consuming, and discouraged many tenants from pursuing their claims.
Fortunately a new scheme was introduced from 6 April, 2007. This scheme came into force under the provisions of the 2004 Housing Act and introduced new rules about tenancy deposits and how they were to be dealt with. The aim of the scheme was transparency, fairness and the protection of both tenants and landlords. The new procedures meant that landlords, or their agents, who took deposit money after agreeing to let property on new assured shorthold tenancies, had to put this money into an approved Tenancy Deposit Scheme. The rules were also applicable for all fixed term lettings that were renewed after 6 April, 2007.
Both of these schemes are insurance-based. The tenant will pay the landlord a deposit, and the landlord will retain the deposit but take out an insurance policy on the new tenancy agreement. If the landlord refuses to return the deposit at the end of the tenancy, the tenant can make a claim against this using the insurance scheme. The company will then investigate the claim, ask for any necessary evidence and decide who is owed the money. It’s worth bearing in mind, that landlords or agents will have to pay a fee to be part of these schemes, so there may be some charges passed on to the tenant.
The Deposit Protection Service is what’s known as a custodial scheme. You give the deposit to the landlord at the commencement of the tenancy, and the landlord pays this money into the scheme. The money is held in an account by the scheme until the tenant leaves the property. The deposit will be automatically returned to the tenant at then end of the tenancy, unless the landlord objects or tells the scheme that the tenant owes him or her money. The scheme administrator will then decide who will get the money back.
It’s up to the landlord to choose which scheme to use. Never the less, all schemes operate under a set of rules that the landlord must follow. It’s incumbent of the landlord to make sure that the tenant has all the relevant details about the scheme, including telephone numbers and other relevant information. Upon signing the agreement and paying a deposit, the tenant should be given a reference number so they can check their details with one of these schemes. The landlord is legally obliged to complete the registration with the scheme within 14 days of receiving the deposit. If the landlord fails to comply with these rules, and doesn’t provide the tenant with the relevant information they need about the scheme, then the landlord has failed to abide by the regulations and it is open to the tenant to take legal action against them.
The tenant would have to bring this action in a county court, using form N208 asking for appropriate action, that is, that the deposit is either returned or placed in a scheme. There is a fee charged to make such an application, so it is worth getting advice from a solicitor about making an application. A solicitor will also be able to tell the tenant whether their income means they qualify for help with paying the court fees.
If the court finds in the tenant’s favour, then the landlord will not have complied with the ne rules will be deemed to have failed to protect the deposit. The court has the power to fine the landlord an amount set at three times the amount of the original deposit. The court will then order the landlord to pay this amount to the tenant. The landlord will also be prevented from ending the tenancy without any reason, until the deposit is properly protected. However, the landlord could still end the tenancy for specific reasons, such as non payment of rent.
The aim of the Tenancy Deposit Scheme is to ensure that tenant’s deposits are properly treated. The intention is to prevent landlords from keeping money they are not entitled to, and make it easier for tenants to obtain a refund of their deposit without having to resort to court action.