As a landlord, tenancy deposit schemes are something you should be aware of. Legislation requires that all deposits must be placed into a scheme within 30 days of the money being paid to you, with enforceable consequences should this not happen. Read on to find out why it is in both parties’ interests to ensure that tenancy deposit schemes are in place on your property or home.
What is a Tenancy Deposit Scheme?
Since 6th April 2007, tenancy deposits in England and Wales have been required to be protected as part of the Housing Act. At the time, the government recognised that standards must be put in place in the letting industry which would protect tenants from unfair charges, ensure that landlords could fairly cover the costs of any damage incurred by the tenant and provide a defined process for resolving any disputes. Tenancy deposit schemes are therefore a legal obligation and failure to comply carries the risk of fines and the potential invoking of the right to serve a Section 21 notice after the fixed term ends on a shorthold tenancy.
With more of the population renting than ever before (19.9% of households), the rental market provides an attractive investment. The figure increased by 19% in 2015/16 compared to the year before. Yet it was shown last year that landlords are risking their investments by not complying with basic legislation. A total of £514 million worth of deposits was believed not to have been placed in tenancy deposit protection schemes in England and Wales.
Both Parties Must be Protected
It is the responsibility of landlords to protect all deposits by placing them into a tenancy deposit scheme within 30 days. This ensures that both parties are covered at the end of the tenancy – landlords have the right to claim the expense of any damages or other monies owed, while tenants are protected from unfair deposit deductions.
There are three government schemes to choose from in England and Wales – MyDeposits, the Deposit Protection Service and the Tenancy Deposit Scheme. Although there is a small fee required from the landlord or agent in order to enter each deposit into an insured scheme, the potential financial repercussions for not complying are far greater. Fines are set at up to triple the deposit amount, potentially totalling thousands. Yet it is estimated that up to 300,000 landlords still take the gamble. Half of all tenants aren’t notified at all about whether their deposit has been protected, which breeds a culture of distrust and reflects a lack of policing in ensuring compliance.
Advice for Landlords
- Let tenants know within 30 days of receiving their deposit how it is protected, along with full details of the protection scheme used.
- Make sure it is clear in the tenant contract the terms which they must adhere to in order to have their deposit returned, and the circumstances which may result in any deductions.
- Ensure that the tenant is fully informed on how they must apply for the return of their deposit, and how to proceed in the event of any dispute.
- Deductions may be reasonably made for cleaning costs, damaged property, unpaid rent or missing items.
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Correct at time of publication. The views and opinions expressed herein are those of the individual contributor and do not necessarily reflect those of the Chancellors Group of Estate Agents Ltd or its subsidiaries. References to legislation, best practice and other matters with legal implications such as fees, rules and processes are included for information and editorial purposes only and are not authoritative, nor should they be interpreted as advice. When in doubt you should only take advice from an industry professional or solicitor where appropriate. E&OE.