Section: Private Sector
Tenancy Deposit Protection Schemes
(This article summarises the main provisions of the Tenancy Deposit Protection Schemes. Summaries of the relevant Regulations appear after it.)
From 6 April, tenants who pay a deposit to a landlord had enhanced protection under the new government authorised Tenancy Deposit Protection Schemes (TDPS).
Introduced under Part 6 of the Housing Act 2004, the new mandatory TDPS means - from 6 April - all deposits taken by landlords and agents in England and Wales must be protected.
The changes significantly improve tenants' rights and ensure deposits are not unfairly withheld.
Tenants pay an average of £700 as a deposit on a property. In 2005-06, 19% of tenants had their deposit returned in part while 11% did not get their deposit returned at all. Recent government surveys found that 17% of tenants felt that all or part of their deposit had been withheld unfairly.
Where damage has been done to a rented property, it is absolutely right that the cost of repairing that damage is taken from the deposit funds. But, where no damage has occurred, keeping hold of this money is unjust. That is why measures have been taken to ensure deposit money is better protected and to introduce new dispute resolution services, to limit the number of disagreements ending up in court.
From 6 April, landlords and agents are required by law to sign up to one of three schemes that have been awarded contracts by the government. The three schemes are as follows:
The Deposit Protection Service (The DPS) is a custodial scheme where landlords must hand over the deposit in full.
Free to use and open to all landlords and letting agents, the DPS service is funded entirely from the interest earned from deposits held. If a dispute arises between the landlord and the tenant at the end of the tenancy, the scheme will hold the amount until the dispute resolution service or courts decide what is fair.
Tenancy Deposit Solutions Ltd (TDSL) is a partnership between the National Landlords Association and Hamilton Fraser Insurance.
This insurance-based tenancy deposit protection scheme enables landlords, either directly or through agents, to hold deposits.
The Tenancy Deposit Scheme (TDS) is an insurance-backed deposit protection and dispute resolution scheme run by The Dispute Service. It builds on a scheme established in 2003 to provide dispute resolution and complaints handling for the lettings industry.
The new scheme enables letting agents and landlords to hold deposits.
In the above insurance based schemes (TDSL and TDS), where a landlord and tenant disagree on what should be paid back, the landlord/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.
Tenants can check to see whether their landlord has protected their deposit under one of the schemes. If within 14 days a landlord hasn't done so, the tenant can apply to the courts. The courts can direct the landlord/agent to pay three times the deposit back to the tenant.
Each scheme includes a free Alternative Dispute Resolution (ADR) service. Once the tenancy has finished, the deposit must be paid back within 10 days so long as both parties agree on the figure. If a dispute arises, the landlord/agent and tenant can use the independent resolution service. It is completely free of charge with any interest accrued from the deposits being used to fund it. Any extra money will be put back into the central fund and used for payouts to landlords or tenants.
New Regulations
Source: Office of Public Sector Information
The Housing (Tenancy Deposit Schemes) Order 2007 SI 796
Came into force: 6 April 2007
Under section 212 of the Housing Act 2004, the appropriate national authority (being, in England, the Secretary of State, and in Wales, the National Assembly for Wales) must make arrangements for securing that one or more tenancy deposit schemes are available for the purpose of safeguarding tenancy deposits paid in connection with shorthold tenancies. Such a scheme must comply with the requirements of Schedule 10.
This Order, which extends to England and Wales, inserts new provisions into Schedule 10 to the Act, including the following:
The Order inserts new paragraphs which set out the procedures that apply after a tenancy is terminated but where the parties are not able to agree to whom a deposit held in a custodial scheme should be paid, either because one of the parties has no current address for, or other means of contacting the other party, or because one party has failed to respond to the communications of the other within the period specified.
The Order inserts new sub-paragraphs that require insurance schemes to make provision as to the requirements that fall to be complied with by a landlord or scheme administrator where a landlord retaining a deposit under an insurance scheme gives notice to the scheme administrator that he no longer wishes to retain the deposit under the scheme.
These paragraphs also require insurance schemes to make provision enabling the scheme administrator, by virtue of the landlord's failure to comply with a relevant obligation, to determine that a tenancy deposit retained by a landlord under its scheme is to cease to be so retained.
It requires provision to be made in the schemes to require the scheme administrator to give certain notices and information to the landlord and tenant. These paragraphs also require insurance schemes to make provisions to require scheme administrators, before terminating a landlord's membership of a scheme after a landlord's failure to comply with a relevant obligation, to give certain notices and information to a landlord and any of his tenants who will be affected by the termination.
The Order inserts a new sub-paragraph that requires a tenant, when notifying the scheme administrator of an insurance scheme under paragraph 6(2) that his landlord has not paid him the whole or part of the deposit he has requested, to indicate whether he consents to the use of the scheme's dispute resolution service to resolve any dispute as to the amount of deposit to be paid to him by his landlord.
The Order inserts a new paragraph which makes provision for the scheme administrator of an insurance scheme, when giving a direction to a landlord to pay an amount into the designated account held by the scheme administrator, to send a notice to the landlord requesting certain information from him. In particular the scheme administrator must ask the landlord to indicate whether he agrees to any dispute being resolved through the use of the scheme's dispute resolution service.
If the scheme administrator determines that he is satisfied that the landlord has received the notice requesting this information, but the landlord fails to indicate whether or not he so consents within the period specified in the paragraph, he will be treated as having agreed to the use of the scheme's dispute resolution service.
The Order inserts new sub-paragraphs which provides that the provision of a dispute resolution service may confer a power on the person acting as an adjudicator in relation that service to decline to proceed with a dispute (or to continue to proceed with it).
The Order inserts new paragraphs which make provision for the service of documents.
The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 SI 797
Came into force: 6 April 2007
Section 213 of the Housing Act 2004 sets out requirements relating to tenancy deposits. Where a landlord receives a deposit in connection with a shorthold tenancy, he must, within 14 days of the date on which the deposit is received, comply with any initial requirements imposed by the scheme and give prescribed information to the tenant and any person who paid the deposit on behalf of the tenant.
This Order, which applies to England and Wales, prescribes the information that the landlord is required to give. The information relates to the authorised tenancy deposit scheme applying to the deposit, to compliance by the landlord of any initial requirements imposed on him by the scheme and to the operation of the provisions contained in sections 212 to 215 and Schedule 10 of the Act.
The Housing (Tenancy Deposits) (Specified Interest Rate) Order 2007 SI 798
Came into force: 6 April 2007
By Section 212(1) of the Housing Act 2004, the "appropriate national authority" (being, in England, the Secretary of State, and in Wales, the National Assembly for Wales) is required to make arrangements for securing that one or more deposit schemes are available for the purpose of safeguarding tenancy deposits paid in connection with shorthold tenancies. A "shorthold tenancy" is defined in section 212(8) of the Act as being an assured shorthold tenancy within the meaning of Chapter 2 of Part 1 of the Housing Act 1988.
A scheme may be a custodial scheme, as defined in paragraph 1(2) of Schedule 10 to the Act, or an insurance scheme, as defined in paragraph 1(3) of the Schedule. At the end of a tenancy a deposit that has been secured in a custodial scheme must be paid in accordance with paragraph 4 of the Schedule.
Where the scheme provides for any amount paid in accordance with paragraph 4 of the Schedule to be paid with interest, the appropriate national authority, under paragraph 3(5) of the Schedule, may specify at what rate of interest it is to be paid.
This Order, which applies to England and Wales, specifies that for the purposes of paragraph 3(5) of the Schedule, the rate of interest is a rate equivalent to the base rate of the Bank of England less 2.32%.
The Housing Act 2004 (Commencement No. 7) (England) Order 2007 SI 1068 (C. 45)
This Order brought into force in England on 6 April 2007 sections 212 to 215 of, and Schedule 10 to, the Housing Act 2004, which relate to tenancy deposit schemes.
This Order also brought into force in England on 6 April 2007 section 53 of that Act, which makes miscellaneous repeals in relation to fire hazards, and section 266, in so far as it relates to those repeals.
The Housing (Scotland) Act 2006 (Commencement No. 5, Savings and Transitional Provisions) Order 2007 SI 270 (C.25)
This Order brings into force provisions of the Housing (Scotland) Act 2006.
Sections 167 to 171, which amend the Mobile Homes Act 1983 and the Caravan Sites Act 1968 to extend protection for people who occupy a mobile home (including changes to provisions on criminal offences relating to harassment), are brought into force on 28 May 2007, as is section 179 which requires the Scottish Ministers to prepare and publish an energy efficiency strategy for living accommodation.
The remaining provisions listed in this Order come into force on 3 September 2007.
These provide for:
- Increased statutory obligations on private landlords to keep houses in repair;
- The right of application by tenants to the Private Rented Housing Panel when the landlord is alleged to be in breach of these obligations; and
- The right for local authorities to carry out works determined by a Private Rented Housing Committee, which a landlord cannot or will not do.
- Provisions allowing local authorities to recover the costs of the work done and relating to appeals are also brought into force.
Two criminal offences relating to landlords of houses subject to repairing standard enforcement orders are brought into force. Schedule 2 makes provision for the procedure of Private Rented Housing Committees.
The power is brought into force for the Scottish Ministers to regulate to change the route for an appeal against a private landlord's decision in relation to the tenant's right to make an adaptation to meet the needs of a disabled occupant.
Provisions allowing a local authority to make and register a repayment charge on living accommodation in order to secure certain amounts due to it are also brought into force.
Some consequential changes in Schedule 6 and some repeals in Schedule 7 of the 2006 Act are also brought into force.
Article 4 saves the effect of Schedule 10 of the Housing (Scotland) Act 1987 in respect of any proceedings already commenced to enforce the landlord's repairing obligations provided for in that Schedule.
Schedule 10 to the Housing (Scotland) Act 1987 allows a sheriff to grant an order excluding certain repairing provisions from a lease or modifying those provisions in a lease.
Where an order has been granted excluding these provisions, article 5 provides that such cases are to be treated as if the sheriff had granted an order under section 18 of the 2006 Act excluding the application to the tenancy of sections 14, 15 and 17 of that Act.
Where an order has been granted under Schedule 10 modifying the provisions of a lease, article 6 provides that those modifications, if they are capable of modifying the provisions of sections 14, 15 or 17 of the 2006 Act, are to be treated as if made by order of the sheriff under section 18 of the 2006 Act.
© Copyright 1996 - 2008 UK Housing Ltd. Housing Monthly Diary
Issue: May 2007 Reporting on March-April 2007
- Homelessness & Asylum Seekers
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