What is a tenancy deposit?
A deposit is a down payment of money before a tenancy begins with the intention of renting. A landlord must put deposits in a government-backed tenancy deposit scheme if the assured short-hold tenancy (AST) commenced after 6th April 2007. If the rental agreement is not an AST, the landlord ‘’can accept valuable items (for example a car or watch) as a deposit instead of money’’.
How are the deposits protected?
Deposits must be protected within 14 days of receiving the money; landlords must then provide deposit information to the tenant within 28 days, including how they will be protecting the deposit. When a landlord or property manager is collecting a deposit, they can use Tenancy Deposit Protection (TDP) scheme which are government approved. The scheme’s role is having governing authority over the transactions between the two parties; including deposit returns, deductions and disputes. In England and Wales, deposits can be registered with:
Landlords must return deposits within 10 days upon agreeing the amount of money that will returned.
Original Deposit Amount – Deductions = Money Returned
The benefits from using a scheme
Landlords can benefit from having access to the Alternative Dispute Resolution (ADR) service. This comes as a free service along with using a TDP scheme as an independent adjudication over disputes regarding deposit transactions. The service will hear from landlords and the tenants to weigh up both sides of the dispute, then make an impartial decision based off evidence presented. This enforces the importance landlord’s maintaining good practise during a tenancy, consisting of taking inventories and regular property visits.
The scheme is also beneficial for tenants. The scheme acts as protection against landlords abusing their position, as tenants can turn to the schemes with any issues they may have. The security extends to protecting their deposits too, as the scheme safely holds the deposit.
For both parties, using a scheme encourages fair play from the outset of the tenancy and can save substantial amounts of court fees to settle any outstanding disputes.