Getting Your Deposit Back: The Tenancy Deposit Scheme
Getting the deposit back at the end of a tenancy has long been one of the most problematic aspects of renting. Tenants will often need the deposit from a previous tenancy to put down as the deposit on a new property. Tenants and landlords may disagree about how much, if any, of the deposit may legitimately be withheld by the landlord. Whilst the majority of landlords are honourable, and return the deposit promptly and in full, there are some who will come up with any excuse to withhold it.
To address this problem a new tenancy deposit scheme was introduced in April 2007. It applies to all tenancies with a yearly rent of up to £25,000 which started after that date. (Tenants whose annual rent is £25,000 or more should note that different rules will apply to their tenancy in other ways, including the way in which their landlord can evict them.)
The Tenancy Deposit SchemeFor all tenancies starting after 6th April 2007, where the yearly rent is less than £25,000, any deposit paid to the landlord must be protected by a government-approved scheme. At the end of the tenancy the tenant and landlord should attempt to agree between them how much of the deposit is repayable. However, if there is any dispute the tenancy deposit scheme will provide a dispute resolution service.
There are two different types of tenancy deposit scheme and it is up to the landlord which scheme he uses to protect the deposit. Both types are run by companies authorised to do so by the government.
The Custodial Scheme for Tenancy DepositsWith a custodial scheme the landlord pays the deposit into the scheme, where it is held for the duration of the tenancy. The interest accruing on the deposit will go towards the running costs of the scheme, with any surplus being paid to the tenant or landlord.
The landlord must give the tenant the contact details of the scheme holding the deposit together with other information, including the purpose of the deposit and how to retrieve it at the end of the tenancy. This information must be provided within 14 days of the tenant paying the deposit to the landlord.
The Insurance Schemes for Tenancy DepositsWith the insurance schemes the landlord keeps the deposit but pays an insurance premium to the scheme, which will then reimburse the tenant should the landlord fail to return the deposit without good reason. Again the landlord must provide the tenant with the contact details of the scheme being used and other information about deposits within 14 days of receiving the deposit.
What Happens at the End of the Tenancy?What happens to the deposit at the end of the tenancy depends on which type of scheme the landlord uses:
- The custodial scheme will distribute the deposit to the tenant and / or landlord in accordance with any agreement reached between them. If they cannot agree how to divide it the scheme will hold on to the deposit until the dispute has been resolved.
- With the insurance schemes the landlord will return the deposit in the usual way if they agree with tenant how it should be divided. If the tenant and the landlord do not agree, the landlord must pay whatever amount is disputed into the tenancy deposit scheme. The scheme will then hold the deposit until the dispute is resolved. If the landlord wrongfully fails to return the deposit the insurance element of the scheme will be used to reimburse the tenant.