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Tenancy Deposit Scheme & Deposit Protection

The new Mandatory Tenancy Deposit Scheme (TDS) will come into effect on 6th April 2007.

The purpose of the Tenancy Deposit Scheme is to address the unfair practices of Landlords and Agents regarding tenant’s deposits in residential tenancies.

Hundreds of thousands of private tenants feel cheated out of millions of pounds by rogue landlords who refuse to pay back rent deposits when they move out, according to figures released (11 May 2004) by national charities Citizens Advice and Shelter.

The Housing Minister, Baroness Andrews said “We are determined to ensure that the proposed Tenancy Deposit Schemes do the job that they were intended to do; that is to protect nearly 1.5 million assured shorthold tenants and an estimated £768m of tenancy deposits currently held in England and Wales”.

Under Part 6 of the Housing Act 2004, landlords or agents can only take a deposit from a tenant if that deposit is protected by a TDS.

The two types of scheme being introduced are:

• a custodial scheme, whereby the deposit is held by the scheme during the tenancy and during any legal dispute
• an insurance-based scheme where the landlord or agent keeps the deposit, but the deposit is insured in case of any dispute and thus protected for the tenant.

Either scheme must repay all or part of a deposit, within 10 days of notification, once a tenancy has ended or a dispute has been resolved.

A landlord will not be able to take a deposit in respect of an assured shorthold tenancy unless it is to be covered by a TDS.

A landlord will have to:

– deal with a deposit in accordance with an authorised scheme,

– comply with the initial requirements of a scheme within 14 days and

– give the tenant the appropriate information relating to the deposit within 14 days of receiving the deposit.

Until this is done, the landlord will be unable to regain possession of the property using the usual ‘notice only grounds’ for possession. Under Section 21 of the Housing Act 1988 a landlord can obtain an order for possession of an assured shorthold tenancy at any point after the first six months of the tenancy providing any fixed term has expired and they give the tenant at least two months written notice.
Preventing a landlord from being able to use this ground will provide the tenant with a much greater security of tenure and will act as an incentive for landlords to ensure deposits are safeguarded by a TDS.

The penalty for landlords that fail to comply with the new rules is an amount equivalent to three times the deposit, to be paid within 10 days.

Clifftons based on Old Christchurch Road, in Bournemouth are an Independent Agent specialising in both Sales & Lettings. If you are thinking about renting your property out and are looking for competent and successful letting agents contact Kim Bartlett MARLA (Residential Lettings Manager) today on 01202 789699 or email: [email protected]

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Posted: 11th October 2006

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