Residential Letting Agents and Property Management Specialists

The government and relevant companies have finally announced their final details in respect to the Tenancy Deposit Scheme, which is part of the Housing Act 2004.

From 6th April 2007, all new tenancies (using AST (Assured Shorthold Tenancy Agreements)) will be affected if the tenant pays a deposit. Only tenancies that commence on or after 6th April 2007 are affected, so all current tenancies and deposits held remain unaffected.

The legislation, brought in to prevent unfair retention of deposits held by landlords and agents alike, carries heavy penalties for failure to comply. 

The penalties for non-compliance include:

A financial payment in the favour of the tenant of up to three times the deposit amount and, perhaps even more importantly, the removal of the right of possession to the property. This effectively makes the tenancy an Assured Tenancy and therefore gives the tenants greater rights to reside at the property.

Any landlord thinking of letting their property privately will be responsible for dealing with the administration of the tenant’s deposit by joining one of the three approved and recognised schemes, along with incurring the costs involved in doing so (unless deciding to join the free custodial scheme). The only way to avoid this new legislation would be to NOT TAKE a deposit from the tenant, not something that we would recommend.

At Forum Lettings we will be offering our landlords the choice of how they wish their tenant’s deposit to be held (should we hold the deposit on their behalf). We will be using both the free custodial scheme and the insurance-backed scheme operated by the NLA (The National Landlords Association), depending upon whichever scheme our individual landlord prefers. We will deal with all the administration of the deposit on behalf of the landlord at no extra cost to them. If a landlord opts to use the NLA (Tenancy Deposit Solutions Ltd - TDSL) scheme, a registration fee of £23.00 (£20 plus VAT) per deposit is required.

We would recommend however, that all private landlords now use an agent to at least act on a 'Tenant Find' instruction, as the agent will then help you to ensure that the deposit is handled appropriately. If you would like to discuss any aspect of letting a property, we at Forum Lettings would be delighted to help. Please feel free to contact us on 01258 459600 for an informal discussion.

What are the schemes?

There are three schemes to choose from. In order for a private landlord to take a deposit in relation to an AST (Assured Shorthold Tenancy), they must join one of the following schemes should they not wish to appoint a letting agent.

The Tenancy Deposit Scheme (TDS)

This scheme is backed by ARLA and RICS and is an insurance-based and dispute resolution scheme. This scheme is based on a previously run optional version. The new scheme enables both landlords and letting agents alike to continue to hold tenant’s deposits in the 'normal' fashion. For more information on this scheme (and the cost for private landlords to join), visit TDS’ website at www.tds.gb.com

The Deposit Protection Service (The DPS)

This is the free custodial scheme that is open to any landlord or letting agent. There is no charge for joining the scheme, as the scheme will be funded by interest earned on the deposits held by the scheme. To ease administration, landlords and agents are able to carry out all the necessary 'paperwork' online, although hard copies of the documentation are available to those landlords or agents who do not have Internet access. The DPS will have their own customer service call centre and an independent dispute resolution service. For further details, visit their website www.depositprotection.com or contact them on 0870 707 1 707.

Tenancy Deposit Solutions Ltd (TDSL)

The National Landlords Association (NLA) and Hamilton Fraser Insurance administer this scheme in partnership. Like the TDS scheme, this too is an insurance-backed scheme that enables landlords and agents to continue to hold deposits. For more information on this scheme (including the cost for private landlords to join), visit www.mydeposits.co.uk