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Your August Property Jargon BusterTenancy Dep

In England and Wales The Housing Act 2004 requires all landlords and letting agents to protect deposits on assured shorthold tenancies. In this article we'll explore why it is needed and how it protects the interests of landlords and tenants.

Why do landlords and tenants need a deposit scheme?

The Housing Act 2004 requires that landlords and lettings agents protect deposits on assured shorthold tenancies in a deposit protection scheme. The legislation was introduced because the Government recognised that many deposits were being withheld unfairly at the end of a tenancy.
It serves as a safeguard for landlords in the event that any terms of the contract are broken. It also means that the deposit money is protected whilst it's with either the landlord or letting agent and provides measures to make sure that tenants get back what they're entitled to when their tenancy ends and they move out.

Is there more than one type of deposit scheme?

Yes, custodial and insured.
  • A custodial TDS requires a landlord to pay its tenant’s deposit to a scheme administrator, who holds the deposit until the tenancy ends.
  • An insured TDS is where the landlord keeps the deposit, but secures it by paying a fee and insurance premiums to the scheme administrator.
Here at Absolute we normally use a custodial TDS.

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What deposit schemes are available?

In England and Wales there are three government approved deposit schemes;
  • The Tenancy Deposit Scheme (TDS)
  • The Deposit Protection Service (DPS)
  • MyDeposits.
Here at Absolute we use the TDS. If you’re not sure where your deposit is protected, refer to the prescribed information, tenancy agreement or ask your landlord or letting agent.

What happens to a deposit?

Once a tenant has paid their deposit it must be protected within 30 days of receipt. In England tenancy deposits are capped at five weeks’ rent where the annual rent is less than £50,000, and six weeks’ rent where the annual rent is £50,000 or more. Once a tenancy ends and the tenant moves out of the property the deposit will be returned to them providing there are no disputes.

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Tenancy disputes

Landlords and lettings agents are able to make deductions from a tenancy deposit if they feel the property has been left in an unsatisfactory state. If a tenant believes that these deductions are unfair or unjustified they can raise it with the deposit scheme. Each scheme offers a free resolution service and will act as independent adjudicators to provide their own legally binding ruling on any deductions. Evidence can be put forward by tenants, landlords and lettings agents to support their case during the dispute in the from of time-stamped photos, inventories and cleaning or maintenance receipts.

Returning a deposit

Once any deductions have been agreed the deposit must be returned to the tenant within ten days.
It is important that tenants leave the property thoroughly clean as leaving them untidy or dirty at the end of the tenancy is the most common deposit dispute and can result in heavy deductions.