New tenancy deposit scheme on the horizon for landlords PDF Print
Tenancy deposits can often be the cause of contention between landlord and tenant, with issues like dilapidations and outstanding rental payments often causing conflict.  However new legislation due to take effect later this year will provide a more straightforward and transparent system for managing this process.

Landlords should familiarise themselves with the new tenancy deposit scheme legislation which takes effect from 1st October 2006. It obliges all landlords to use a tenancy deposit scheme rather than making their own arrangements for the retention, investment and return of deposits.  After this date no person may ask for or take a deposit payment unless it is paid into an authorised scheme within 14 days. 

Landlords must sign up to an insured scheme such as the existing Tenancy Deposit Scheme for Regulated Agents (TDSRA) or the use of a custodial scheme will be compulsory.  The legislation also clearly states the consequences of failure to comply; a court of law must order a landlord to repay three times the deposit to the applicant as a penalty.

Private sector landlords and letting agents who want to retain control of deposits and provide independent adjudication for the return of disputed deposits will have to join a fully insured and bonded scheme.  All other landlords and agents will be required by law to put deposits into a custodial scheme.

Although the legislation affects all landlords across the UK only a minority of them and their tenants are aware of it. Recent research by the Dispute Service, the not-for-profit company set up to manage the TDSRA, shows that very few landlords are aware of or understand the new rules.  In their latest survey only 43 per cent of landlords knew of the legislative change and only 16 per cent actually understood how the changes would affect them. Some are likely to be inadvertently breaking the law in October if more isn’t done to raise awareness.

Although the TDSRA is not compulsory in itself it is likely to be one of the most convenient and professional ways for landlords and agents to adhere to the new legislation.  Landlords and tenants would be advised to seek out agents who are members of the scheme in order to handle their tenancy as both parties have full protection should any dispute arise. 

The legislation may seem like a daunting obligation but in reality any system which equitably simplifies the very contentious deposits process has got to be good news for landlords, tenants and managing agents alike.