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Lettings • Sales • Block Management

Tenancy Deposit Scheme (TDS)

Tenancy Deposit Protection (TDP) legislation was introduced on 6 April 2007 with two main objectives:

  1. To ensure good practice in deposit handling, so that when a tenant pays a deposit, and is entitled to get it back, they can be assured that this will happen.
  2. To assist with the resolution of disputes by having an alternative dispute resolution service (ADR).

It also encourages tenants and landlords to have in place, from the outset, clear agreement on the condition of the property through best practice, such as the use of inventories.

From 6 April 2007, all deposits taken by landlords for Assured Shorthold tenancies (ASTs) - the vast majority of tenancies - in England and Wales must be protected by a tenancy deposit protection scheme.

To avoid disputes going to court, each scheme will be supported by an alternative dispute resolution service (ADR), whose aim is to make disputes faster and cheaper to resolve.

Tenancy Deposit Schemes

  • Landlords (or their agents) will be required to join a statutory tenancy deposit scheme, if they take deposits. This will mean that deposits are safeguarded.
  • Tenants will get all or part of their deposit back, if they have kept the property in good condition and are entitled to get their deposit back.
  • The scheme offers alternative ways of resolving disputes which aims to be faster and cheaper than taking court action.
  • Landlords will be able to choose between two types of scheme: a single custodial scheme and two insurance-based schemes.

Insurance-based schemes:

  • The tenant pays the deposit to the landlord (or their agent);
  • The landlord (or agent) retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme;
  • Within 30 days of receiving a deposit, the landlord must give the tenant prescribed information (to be set out in secondary legislation) about the scheme being used;
  • At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord (or agent) arrange for the deposit to be divided accordingly;
  • If there is a dispute, the landlord (or agent) must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
  • If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.

Example: a tenant pays a deposit of £1000. At the end of the tenancy, the landlord says he wishes to keep £200 to pay for replacing damaged furniture. The remaining £800 will be returned to the tenant.

The tenant disagrees, claiming the furniture was damaged when they moved in. Both agree to go to ADR, so the disputed £200 will be transferred to the scheme administrator until the dispute is settled.

In each scheme, the deposit must be returned within 10 days of the landlord and tenant agreeing how the deposit should be divided, or within 10 days following notification of an ADR/court decision.

Custodial scheme:

  • The tenant pays the deposit to the landlord;
  • The landlord then pays the deposit into the scheme;
  • Within 30 days of receiving a deposit, the landlord must give the tenant the prescribed information (to be set out in secondary legislation) about the scheme being used;
  • At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;
  • If there is a dispute, the scheme will hold the disputed amount until the dispute resolution service or courts decide what is fair;

The Schemes

There are numerous schemes to which Agents and Landlords can belong:

Dorset Property is a member of the TDS

The Dispute Service, was established in 2003 to provide dispute resolution and complaints handling for the lettings industry, including a voluntary deposit scheme for regulated agents which TDS has now absorbed. It is available to landlords and agents. For more information, visit www.tenancydepositscheme.comtheir website or call 0300 037 1000.

Landlords, find out more ...