This article explains how Tenancy Deposit Scheme will affect both tenants and landlords. It summarises the changes that are required and how each party’s rights have been affected by the introduction of the scheme.
From 6 April 2007 a new law governing housing deposits has come into force affecting many thousands of property landlords, letting agents and tenants. Each year residential landlords take deposits worth about £1.2bn from tenants to secure them against damage to the rented property and contents. From April 2007, all deposits (up to the level of £25,000) taken by landlords and letting agents (for Assured Shorthold Tenancies in England and Wales), must be protected by a tenancy deposit protection scheme. The new tenancy deposit law will be introduced to give more protection to tenants by preventing landlords and letting agents from unfairly withholding a tenant’s deposit. The scheme protects all Assured Shorthold Tenancies in England and Wales (covering most tenancies since 1997).
Essentially the change will compel a landlord to hand over deposits to a third party or have an insurance scheme cover it.
Landlords will still be able to make deductions for damage but in the case of a dispute the third party or insurance company will act as the arbitrator and pay out money owed to tenants.
The landlord’s costs of insurance scheme membership and the premium may be passed on indirectly to tenants by means of increased rents. This is obviously not an intended consequence and is the unfortunate price tenants must pay in order for their deposit to be safeguarded.
Key to the success of the scheme will be the preparation and agreement of a full and detailed inventory of the property and contents at the commencement of the tenancy. It is not realistic to expect every landlord and tenant to agree and there will be plenty of work for independent inventory clerks.
What is it?
The Tenancy Deposit Protection ensures:
Tenants get all or part of their deposit back (if they are entitled to it);
Any disputes between tenant and landlord or agent will be easier to resolve;
Landlords and letting agents who do not protect tenancy deposits will have to pay their tenant back three times the deposit.
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