6th April 2007 saw a change in the law for Tenancy Deposit Scheme

Changes have been made to the way in which rent deposits are to be held by residential property landlords.

Where, on or after 6th April 2007, a landlord takes a deposit from a tenant of residential property, the deposit must be protected by a Tenancy Deposit Scheme.

The Deposit Schemes

Two types of scheme are being introduced:

1. A custodial scheme, where the deposit is held by a Government appointed private company.

2. An insurance based scheme, where the landlord or agent holds the deposit but the deposit is insured, in case of any dispute.

The deposit will be held (under either scheme) until the end of the tenancy.

If, at the end of the tenancy, the landlord and the tenant cannot agree upon the amount of deposit to be returned, the dispute may be sent to arbitration or even considered by the courts.

A landlord will have to comply with one of the two schemes and, within 14 days of receiving the same, tell the tenant how the deposit is to be protected.
Penalties and Restrictions

A landlord who fails to comply with the requirements may face fines of three times the deposit taken, and will not be able to evict a defaulting tenant until the deposit holding arrangement is regularised.

Prescribed procedures will regulate use by the landlord of the deposit on tenant default; he or she will not, for instance, be able simply to forfeit all or part of the deposit held, where a tenant does not pay the last month’s rent or leaves the property in poor condition at the end of the tenancy.