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Tenants Deposit Scheme – Ignore it at your peril

February 27th, 2014

Written April 2012

What is a TDS?

A landlord under an assured shorthold tenancy (AST) must protect a tenant’s deposit by using an authorised tenancy deposit scheme (TDS) operated by an approved scheme administrator. A TDS has two main objectives:

  • To ensure that, when a tenant pays a deposit, it will be protected and returned to the tenant at the end of the AST, except when the landlord has a legitimate claim on it.
  • To resolve disputes between landlords and tenants using dispute resolution rather than via the courts.

There are two types of TDS:

  • A custodial TDS requires a landlord to pay its tenant’s deposit to a scheme administrator, who holds the deposit until the tenancy ends.
  • An insurance TDS where the landlord retains possession of the deposit, but secures it by paying a fee and insurance premiums to the scheme administrator.

What are a landlord’s obligations under a TDS?

Within 30 days of receipt of the deposit a landlord must:

  • Comply with the “initial requirements” of the TDS.
  • Give the tenant certain prescribed information.

What sanctions are available if a landlord fails to fulfil their obligations under a TDS?

  • If the landlord fails to comply with the TDS, the tenant can now apply to court even if the tenancy has ended.
  • The penalty for failing to comply with the TDS will now be between one and three times the deposit.

A further difficulty for Landlords who have not put the tenant’s deposit into the TDS is that they are not able to bring possession proceedings against the tenant under the accelerated procedure rules if they fail to pay their rent.

 

Important Note:

The above information is for general guidance and in part may form the opinion of the author. It is based on the law as at the date of this article.  It should not be relied upon in part or in whole as a substitute for independent legal advice.

If you need advice regarding a tenant’s deposit then please contact the writer, John Donnelly, who will be pleased to advise you in light of your personal circumstances. We cannot accept any liability to third parties for the incorrect interpretation or application of the information contained in this article.

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