The Housing Act 2004 brought the TDPS into play enabling tenants to retrieve all or part of their deposits back form their landlord or letting agent, where they are entitled to it.
It is now legally compulsory for all deposits between landlords/letting agents and tenants to be held under a Tenancy Deposit Protection Scheme. Deposits are generally defined as any money received by the landlord/letting agent that is not for payment of rent. Assured Tenancies and company lettings are not covered by the Tenancy Deposit Protection Scheme however all Assured Shorthold Tenancy agreements are.
The Tenancy Deposit Protection Scheme ensures that all landlords and letting agents treat their tenants fairly, and when entitled to the tenant receives their deposit back at the end of the tenancy.
There are 2 schemes namely (1) The Custodial Protection Scheme and (2) The Insurance Based Protection Scheme and are run by government appointed service providers.
Custodial Protection Scheme
- The Deposit Protection Service (run by The DPS) Insurance Based Protection Schemes
- My Deposits (Run by Tenancy Deposit Solutions Ltd)
- The Tenancy Deposit Scheme (Run by The Dispute Service) All 3 service providers are accessible to all letting agents and landlords. Should disputes arise, an Alternative Dispute Resolution (ADR) Service is afforded by all 3 service providers.
Currently, disputes are referred to these schemes in fewer than 2% of tenancies.
Advantages- The cost of dispute resolution is free to tenants but cost to landlords/letting agents via membership fees.
- They ensure that an impartial decision is made one way or the other
- They are quick - disputes are nearly always resolved in less than a month
- They give access to an independent adjudicator
- There is provision to resolve a claim from either the landlord or the tenant if the other party is absent or uncooperative
- Once the dispute is decided by the adjudicator, the schemes ensure that the deposit is paid
- It is highly unusual for the whole deposit to be either retained by the landlord, or returned to the tenant.
Disadvantages
- It is the responsibility of the landlord, the agent and the parties concerned to provide all the relevant information - the adjudicator will not investigate the problem
- The decision is binding on both parties, so if you are not happy with the decision you can't then take the dispute to court
- If there is a dispute, the agreement of both landlord and tenant is needed to use the adjudication scheme. If one refuses, then the case has to go to the small claims court
- Although the schemes are free to tenants, they have to be paid for somehow. One is funded by the interest on the deposits which are held by the scheme, and the other two by landlord membership fees. This cost may well be passed on to tenants in higher rents.
