Deposit protection schemes what landlords need to know
If you're a landlord in England and Wales, it's crucial to consider deposit protection schemes when renting out residential property. These schemes are mandatory by law and ensure that both you and your tenant are protected by specific requirements when a deposit is agreed upon.
During the tenancy term, you, as the landlord, may hold the deposit to cover any non-payment of damage, rent, breakages, or cleaning during the tenancy period. Since April 2007, deposit protection has been a legal obligation on assured shorthold tenancies.
As a landlord, you must place any deposit received in one of the three government-approved tenancy deposit schemes available in England and Wales. These schemes include the Deposit Protection Service (Custodial and Insured), Tenancy Deposit Scheme (TDS), and My Deposits. All schemes offer insured or custodial protection depending on whether you want the scheme to hold your deposit without additional costs or if you're willing to pay the scheme for your deposit to be insured.
You or your letting agent must put your tenants' deposit in the chosen scheme within 30 days of receiving it; otherwise, you could face consequences such as your tenant having a defence to any claim made by you for rent arrears. In addition, your tenant could claim three times the deposit amount in addition to the return of the deposit as recompense for your failings. You cannot serve a valid Section 21 notice under Section 215 of the Housing Act 2004, and the only resolution available would be to return the deposit to the tenant in full or make a successful application to your country court under Section 214(1).
Once the deposit is secured, it's recommended that your tenant receives copies of any leaflets provided by the scheme. This information is imperative to the tenant as it's recognised as a legal requirement, and failure to comply could lead to prosecution.
Certain deductions can be made from the deposit when the tenant fails to uphold their duties as stipulated in the tenancy agreement. For instance, if an item is damaged or goes missing, you can deduct money for the replacement. If the tenant fails to repair or replace the affected area/item, you may be responsible for replacement at their request.
If the tenant owes rent or maintenance costs, you may deduct any unpaid monies from the security deposit. In addition, you can begin court proceedings to recoup the remainder amount in excess of the security deposit held.
Once the tenancy has ended, an agreement will be reached about how the deposit will be returned, and the deposit scheme will follow through on it. If there's a dispute, the deposit scheme should be notified immediately, and they will hold the deposit until the courts or their dispute resolution service decide on fair proceedings.
To learn more about deposit protection schemes and your responsibilities as a landlord, you can visit the gov.uk page. If you need assistance with your letting journey, you can contact M&P Estates, where they provide a free and instant online valuation to see how much rent you could be charging in the current marketplace. They're based in South Ockendon, Essex and are an ARO client that offers a rent guarantee.