The deposit protection scheme and what it could mean for you

Landlord Law – Deposit Protection Scheme

Deposit protection schemes, otherwise known as tenancy deposit protection, are an important piece of the law regarding the rights of tenants versus landlords. The main thrust of the legislation that led to the establishment of deposit protection schemes is to guarantee that tenants will receive their deposits back at the end of their periods of tenancy.

A deposit is a payment that a tenant pays to their landlord upon the commencement of the tenancy in order to ensure that the property is returned to the landlord in good condition, whereby the deposit will be returned.  Deposit protection schemes are there to make sure that this transaction happens as explained above.

This is extremely important as in the UK in 2009 75% of all private sector tenancies required the payment of a deposit, and due to the un-affordability of housing the number of private tenancies is growing. In the financial year 2008/9 only 70% of all deposits were paid back in full, with 17% only receiving part of their tenancy and a further 13% not receiving it back at all. The reasons cited by landlords for not returning deposits were damage to the property, cleaning the property, unpaid rent or bills and a variety of other reasons.

Deposit protection schemes were established as part of the Housing Act 2004, with updates made to this law by the Localism Act 2011, and apply to all assured short-hold tenancies (ASTs). ASTs are the standard form that a private tenancy agreement takes in the UK, and means that the landlord has the right to terminate the tenancy using a section 21 notice. As of the new deposit protection schemes all deposits paid under an AST after 6 April 2007 legally have to be protected within 30 days of being received by the landlord in question.

There are a number of groups of people who do not need to be registered to a deposit protection scheme and these are; resident landlords, tenancies that are worth over £100,000 a year to the landlord, tenancies involving student accommodation owned by the university and companies.

Deposit protection schemes do not apply to tenancy agreements that were signed before the 6 April 2007, unless this tenancy agreement has been renewed after that date.

Under a deposit protection scheme the landlord in charge of the property must protect the deposit paid to them using either a custodial scheme or an insurance based scheme. The landlord has free reign over which of these two options they choose to use, but they must do it within 30 days for deposits made after 6 April 2007. Meanwhile, the tenant should always make sure that they and the landlord have carried out and agreed on an inventory when the tenancy starts.

Under the provisions of any deposit protection scheme, the tenant can apply to the county court for a legal order that forces the return of the deposit if the landlord has failed to either return or adequately protect the deposit. The county court can also order the landlord to pay compensation to the tenant is sufficient wrongdoing has been committed.

For deposits made after 6 April 2007, the tenant has guaranteed recourse even after the tenancy has ended, and the compensation the landlord must pay out will be between one and three times to deposit paid.

Your landlord is perfectly within their rights to withhold part of a deposit if they can prove that they have lost out financially because of the tenant’s actions.

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