Damage Deposit

Advice

The return of damage deposits can be a lottery. Tales about unscrupulous landlords who keep deposits without saying why or for reasons that cannot be justified are all too common. Maybe you have been a victim of this in the past or know someone who has.

However this should now be a thing of the past with the introduction of the Tenancy Deposit Protection Scheme. This new law covers all assured shorthold tenancies which started on or after 6 April 2007.

If landlords want to take a damage deposit, they must protect tenants’ money by joining one of the three government-sponsored schemes. The schemes aim to provide an easier, cheaper and quicker way for tenants to reclaim their deposit if there is a dispute between landlord and tenant over how much should be refunded.

Types of schemes

All schemes offer an independent dispute resolution service whose aim is to broker a deal between landlord and tenant without the need to take the dispute to the County Court. Once a decision has been reached, the money must be refunded to the tenant within ten days (if the decision goes in their favour).

Although there are three government schemes, these fall into two different types, the difference being the way the deposit is held during the tenancy.

The custodial scheme involves landlords paying the money to the scheme for safekeeping during the tenancy. When an agreement has been reached over who is entitled to the money at the end of the tenancy, the money is directly refunded by the scheme to whoever is entitled.

The insurance scheme involves the landlord keeping the deposit during the tenancy and paying an insurance premium. If there is a dispute over any of the deposit, the landlord must pay the disputed amount over to the scheme administrators until an agreement has been reached.

Duty on Landlords

If the landlord fails to comply with this or refund the money (despite the tenant being entitled to be refunded), the scheme operator will pay the tenant by claiming on the landlord’s insurance policy ensuring that tenants do not miss out on getting their money refunded.

Landlords must provide their tenants with full details of how their deposit is being protected within thirty days of receiving the money. The information which should be given to tenants is:

• The contact details of the tenancy deposit scheme selected

• The landlord or agent’s contact details

• How to apply for the release of the deposit

• Information explaining the purpose of the deposit

• What to do if there is a dispute about the deposit

Non-compliance

If landlords have not protected their tenants’ deposit, tenants have the right to enforce the protection of their deposit through the County Court. The Court can order that the deposit be protected properly or repaid to the tenant and can impose a fine on landlords for not compiling with the new law. The amount of the fine is between one and three times the original deposit.

Action for tenants

You should make sure that your damage deposit has been protected by first making sure you have received either from your landlord or agent written confirmation that your deposit has been protected. Even if you have had this, it is always wise to check directly with the scheme to make sure that protection has taken place.