Landlords and agents requiring deposits may now need to ensure that those deposits are protected by a 'Tenancy Deposit Scheme' under new rules introduced in the Housing Act 2004. These rules will apply to all assured shorthold tenancies created after 6th April 2007.

Landlords will need to choose between two main types of Tenancy Deposit Scheme:

Custodial Schemes:
The landlord passes the deposit to a Scheme which holds the deposit for the duration of the tenancy. When the tenancy ends, the landlord and tenant should agree on how much of the deposit is to be returned. If there is disagreement, the Scheme continues to hold the deposit until the matter is resolved through a form of dispute resolution or through the courts.

Insurance Schemes:
The landlord keeps the deposit but must insure the deposit to protect it for the tenant should there be a dispute as to how much is to be returned at the end of the tenancy.

In both schemes landlords must inform tenants how their deposit is protected within 14 days of receiving the deposit.

Failure to comply with this duty might result in the landlord being unable to regain possession of the property using the procedure in Section 21 of the Housing Act 1988.

The tenant might also be able to apply to the court to ensure that the deposit becomes protected and, among other sanctions, the court could order the landlord to pay three times the amount of the deposit back to the tenant.

For more information please contact Sarah Adlam