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					                         Tenancy Deposit Protection Scheme
New government regulations brought into force the Compulsory Tenancy Deposit Scheme
on Friday 6th April 2007.

The Scheme covers the vast majority of Assured Shorthold Tenancies created after 6th April, with
only a very few exceptions.

It is now compulsory for any landlord taking a deposit from a tenant on or after 6th April to
join one of the three schemes available, but the landlord is able to choose which scheme
applies.

Within 14 days of taking the deposit, the Landlord must inform the tenant which scheme applies to
the tenant’s deposit.

The three schemes available are:

1. The Deposit Protection Service
This scheme has no up-front charge, with no registration fee, no membership fee and no fee for
protecting deposits.

The landlord pays the deposit to the Deposit Protection Service within 14 days of receiving it. The
Deposit Protection Service will then hold the deposit until the end of the tenancy.

At the end of the tenancy, if the landlord and tenant can agree how the deposit is to be divided they
will inform the Deposit Protection Service, which will return the money with proportionate interest
direct to the landlord’s and tenant’s bank accounts.

If there is a dispute over the deposit, the landlord and tenant will inform the Deposit Protection
Service. It will then return any undisputed money as above, but the amount in dispute is held by it
until the dispute is resolved by alternative dispute resolution or the courts.

The costs of this scheme will be met by the Service reducing the interest payable to the landlord
and tenant (the cost is estimated to be £35 per year loss of interest on a deposit of £700).

Landlords and agents may register with Deposit Protection Service online, whose website may be
found at www.depositprotection.com.

2. Tenancy Deposit Solutions Ltd
This is one of two insurance based schemes. There is a one-off joining fee of £58.75 (£47 if the
landlord is a member of the National Landlords Association). There is an annual renewal fee of
£14.70 and a fee of £30 per deposit is lodged with the scheme (or £26 for NLA members). All fees
include VAT. The website for this scheme is www.mydeposits.co.uk.

3. The Tenancy Deposit Scheme
This is the second insurance based scheme. There is an annual subscription of between £521 and
£1,609 for landlords affiliated to a landlords’ association. If not a member of an association, there is
an annual subscription of £95 + VAT and a fee of £44 + VAT per year for each property covered by
the scheme. The website for this scheme is www.tenantdepositscheme.co.uk.

With both insurance schemes the landlord retains the deposit and pays the fees to the insurer. At
the end of the tenancy, if the landlord and tenant agree on the amount to be returned to the tenant
the landlord simply returns the agreed amount and retains the rest.

If there is a dispute, the landlord must hand the disputed sum to the insurer. This money is then
held by the insurer until the dispute is resolved by alternative dispute resolution or the courts. If the
landlord does not hand the money to the insurer, the insurer will give the tenant money to equal the
full amount of the deposit.

Alternative Dispute Resolution
With all of the schemes, the alternative dispute resolution schemes are free of charge and will be
run by the Chartered Institute of Arbitrators. Details are available on the Deposit Protection Service
and the insurers’ websites.

Landlords’ obligations
All landlords of assured shorthold tenancies starting on or after 6th April 2007 must comply with the
new regulations and use one of the above schemes for the deposits collected from the tenants.

Landlords must return deposits within 10 days of agreement being reached with the tenant or after
the alternative dispute resolution service has made a decision.

If a landlord does not comply with the schemes:
1. He will not be able to remove the tenant by the normal two month notice period after the end of
the tenancy agreement.
2. He may be forced to pay the full deposit to the Tenant and may be fined up to three times the
amount of the deposit. This money will be given to the tenant.

Overview
The new regulations make it vital that schedules of condition and inventories are made as
comprehensive as possible, at the start and end of tenancies. The landlord’s belongings and any
damage to the property must be checked (with photographs being extremely useful) by both the
landlord and the tenant, with inventories signed by both. Disputes will be resolved by looking at the
evidence, and it will be vital to prove the condition of the property before and after the tenancy if
landlords are to retain money to cover their expenses.


This document can only be a short consideration of the new regulations. Please contact
Guest Walker & Co if you require any clarification. We will be pleased to explain how the
new schemes relate to your individual properties, tenancies and circumstances.

				
Jun Wang Jun Wang Dr
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