What is the Tenancy Deposit Scheme?
There are actually two types of Tenancy Deposit Scheme but they offer much the same thing - they protect your deposit and allow you to get it back when you're entitled to it.
The schemes encourage both the landlord and the tenant to make a clear agreement about the condition of the property at the beginning of the tenancy. If there is a dispute over this at the end of the tenancy, both schemes provide a free dispute resolution service to sort out how much of the deposit you're entitled to receive back.
Does my landlord have to use a Tenancy Deposit Scheme?
As of 6th April 2007 all landlords in England and Wales have a legal obligation to protect a tenant's deposit. This applies to assured shorthold tenancies, the most common type of tenancy. If your landlord isn't doing this through a government authorised scheme, they could be ordered to pay you three times the deposit as punishment!
The scheme is meant to ensure you get back exactly what you're entitled to, and also help to resolve any disputes that do arise. It also encourages both parties to agree at the start of the tenancy what terms and conditions apply so that disputes can be avoided in the first place.
What are the two types of Tenancy Deposit Scheme?
The two types of scheme are called 'Insurance Based' and 'Custodial'.
In an Insurance Based scheme, you give your deposit to your landlord. They keep it themselves, but protect it by taking out insurance. At the end of the tenancy it is your landlord's responsibility to return all (or some) of the deposit if you both agree on the amount. If a dispute arises, the landlord has to give the disputed amount to the tenancy deposit scheme to look after whilst the issue is being resolved. If the landlord fails to comply with the decision, the insurers will pay you whatever amount you're entitled to.
In a Custodial scheme, you give your deposit to your landlord, but they hand it over to the tenancy deposit scheme for safekeeping. At the end of the tenancy the scheme will divide the deposit (or give it all back) depending on what agreement you and your landlord reach. If there's a dispute, the scheme holds onto your deposit until a resolution has been reached.
In both cases you're entitled to certain information from your landlord. Within 14 days of receiving your deposit, your landlord has to tell you:
- Their contact details
- The contact details of the tenancy deposit scheme
- An explanation of the purpose of your deposit (what it covers)
- How to apply for the return of your deposit (e.g. at the end of the tenancy)
- What you should do if there's a dispute
They also have to return your deposit within 10 days of a dispute being settled.