Tenants Deposit Protection: (this applies to ALL Assured Shorthold Tenancies)
With affect from 6th April 2007 it is now compulsory to enter the tenants deposit into a Deposit Protection Scheme.
You are required by law to pay the deposit into one of the schemes outlined below within 30 days of the agent, or if rented privately, the Landlord receiving the deposit.
You must also give tenants prescribed information regarding where their deposit is being held, what happens to the deposit etc. This must also be done within 30 days.
Most landlords think that the deposit schemes will do this for them, however, they do NOT.
There are 4 main schemes available:
– this is run by Computershare Investors Services PLC on behalf of the Government. This is open to ALL Landlords and Agents and has no preconditions to becoming a member.
Insurance backed schemes:
– Computershare Investors now offer an insurance backed non custodial scheme.
The National Landlords Association backed by Hamilton Fraser Insurance offer to Landlords and Agents a “pay-as-you-go” scheme with a one off joining fee and yearly renewal. You will additionally have to pay a fee per deposit paid into the scheme.
The Association of Residential Letting Agents (ARLA) also has a scheme available to Landlords and agents however eligibility to this scheme is very strict. You will require a separate bank account, client money protection insurance, professional indemnity insurance etc.
How does it work?
At the start of the tenancy a Head tenant (if more than one) must be nominated, their details, the tenancy details, Landlords details etc are registered with the scheme within 30 days of receiving the deposit. The tenants must also receive within this timescale certain pieces of information regarding procedures, where the money is held, how it is repaid etc.
At the end of the tenancy you must tell the Tenant within 15 working days of the end of the tenancy if you propose to make any deductions from the Deposit. The tenant is required to sign documentation detailing acceptance of the charges. The deposit can then be paid out accordingly.
If an agreement cannot be reached then arbitration must be initiated. This involves all of your proof being sent to the arbitrator, the tenant will also send theirs. A decision will then be made by the arbitrator and payments then sent accordingly once both parties are aware of the outcome.
How does this affect me?
If you choose to use our Fully Managed service, then it doesn’t affect you, we will arrange to provide your tenants with all of the information that is required and deal with issues at the end of their tenancy. We will require you to be available for discussion at the end of the tenancy. If you are choosing the Let only service then we would advise you to use the Custodial Scheme, all of the information is available on their website www.depositprotection.com
Points to note: The Housing Act looks more favorable on the Landlord if they have a professional Inventory with a schedule of condition preferably with digital photos at the start of each tenancy along with an independent Checkout at the End of the tenancy. Now that the tenants have the right to agree/disagree with any deductions that are to be made and to enable speedy resolution to any dispute, the better the evidence at the start of the tenancy, it is more likely that arbitration will go in your favour.