Changes to Tenancy Deposit Scheme

Latest Landlord News by: Madalena Penny

Changes to the Tenancy Deposit Scheme will come into effect as from April 6th 2011, giving less time for landlords to lodge a claim for dispute.

The TDS, which was introduced in England & Wales in April 2007, will now only allow 3 months for landlords to lodge a complaint against tenant damage.  However this is only applicable to new tenancies, while existing tenancies will still adhere to the 6-month rule.

It’s of use for landlords to note that they will need to get their invoices, quotes and photographic evidence collected and sent off sharpish within the three month deadline if they are lodging a dispute offsetting the tenant’s deposit against any damage made to a rented property.

The Tenancy Deposit scheme has received some criticism since it’s introduction and come under attack from landlords, primarily because of the length of time disputes can take and the lack of support for landlords especially if tenants cannot be found or do not respond.  When the scheme was first introduced it only affected landlords receiving a rental income up to £25,000 per annum under an AST, but in October last year the threshold was increased to £100,000.

Landlords who fail to refer a tenant’s deposit can face a fined penalty amounting to 3 times that of the deposit along with legal and court costs if a tenant makes a claim against a landlord or letting agent as laid out in the Housing Act 2004.  It’s also worth noting that indemnity insurance won’t cover these costs if any landlord or letting agent is found guilty of a non-referral of a tenant’s deposit.

However, a ‘holding’ deposit, which is paid by the potential tenant before a tenancy is signed is not classed under the tenancy deposit scheme and therefore not applied to as a deposit.  (Tenants should be made aware that a holding deposit provided for a potential property is not always refunded by landlords and letting agents if the tenant fails to take the property and holding deposits are usually agreed to go towards the full deposit once the tenancy is signed.)  It is only when the tenant signs the tenancy agreement, then pays the deposit to the landlord does it officially become a ‘deposit’ and must be paid into a scheme.

In Scotland this month, a new law was introduced to their tenancy deposit scheme in which deposits are paid direct into the scheme, bypassing the landlord or letting agent completely.  If a dispute arises between tenant and landlord it is immediately referred to an independent arbitration service.

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