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Tenancy deposit protection

10/05/2007

Tenancy houseFrom the 6th April 2007, all deposits taken by landlords and/or their agents for Assured Shorthold Tenancies must be protected by a tenancy deposit protection scheme. Landlords will be able to choose between two schemes: a single custodial scheme and an insurance based scheme.

The custodial scheme - the following points must be adhered to:

  • The tenant must be given the prescribed information about the scheme used, when the deposit changes hands.
  • At the end of the tenancy, the landlord and tenant must agree as to the amount of the deposit to be returned. They will then tell the scheme, which will return the deposit accordingly.
  • If there is a dispute, the scheme will hold the amount until the dispute resolution service or courts decide what is fair.
  • The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant or landlord if the tenant isn’t entitled to it.

The insurance based scheme - the following points apply.

  • The Landlord holds the deposit and pays a premium to the insurer – this is the key difference to the custodial scheme.
  • The tenant is advised as to the scheme being generated by the Landlord.
  • At the end of the tenancy, the deposit or part is returned to the tenant.
  • If there is a dispute, the Landlord must hand over the disputed amount to the insurer for safekeeping until the dispute is resolved.
  • If for any reason the Landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.
  • Under the scheme, provided both landlord and tenant are advised, it is believed that interest can be retained by the deposit holder and this will cover the operational costs of maintaining the dedicated property deposit account.

Fisher German intends to operate the Insurance Based Scheme. For further information or advice on the letting of any type of rural property please email  richard.flather@fishergerman.co.uk

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