Housing Law – Tenancy Deposit Schemes

By : Nicola Muir

The tenancy deposit scheme introduced by the Housing Act 2004 will come into force on 6th April 2007. After that date, all deposits taken by landlords in respect of any assured shorthold tenancy will need to be protected by a tenancy deposit scheme.

Tenancy Deposit Schemes

The tenancy deposit scheme introduced by the Housing Act 2004 will come into force on 6^th April 2007.  After that date, all deposits taken by landlords in respect of any assured shorthold tenancy will need to be protected by a tenancy deposit scheme.

The schemes have two main purposes:

• to safeguard tenancy deposits paid in connection with assured shorthold tenancies; and
• to facilitate the resolution of disputes arising in connection with such deposits

The Schemes

The Government has awarded contracts to three companies to run the schemes, namely, Computershare Investor Services plc, the Dispute Service Limited and Tenancy Deposit Solutions Limited. 

There are two types of scheme being introduced:

• a custodial scheme, whereby the deposit is held by the scheme during the tenancy and during any legal dispute
• two insurance-based schemes where the landlord or agent keeps the deposit, but the deposit is insured in case of any dispute and thus protected for the tenant.

Each of the schemes provides an Alternative Dispute Resolution service.

The Requirements

When the provisions come into force, the landlord will have to choose one of the three schemes and:

• deal with the deposit in accordance with the chosen scheme;
• comply with the initial requirements of the scheme within 14 days and
• give the tenant details of the scheme within 14 days of taking the deposit – see section 213 HA 2004. 

Sanctions

The landlord will be unable to rely on section 21 of the Housing Act 1988 for the purposes of regaining possession of his property until he has complied with the new requirements.

In addition, where the tenant has paid a deposit but the landlord fails to comply with the new provisions, the tenant may make an application to the court for an order that the landlord either to repay the deposit to him or to pay it into one of the schemes.

If the landlord fails to comply with the new provisions by the date of the court hearing, the court must also order the landlord to pay the applicant a sum equal to three times the amount of the deposit

See –   
Housing Act 2004 – sections 212 -215 and Schedule 10
The Housing (Tenancy Deposit Schemes) Order 2007-02-27