Mon, 26 Mar 07
One of the most important changes to residential letting in the last 20 years is due to occur next week and independently owned letting specialists, Leaders, is concerned that there is not enough awareness among landlords, tenants and agents about it.
The Tenancy Deposit Protection Scheme (TDPS) is new legislation being introduced under the Housing Act 2004 to ensure that when a tenant pays a deposit, and is entitled to get it back, they can be assured this will happen.
This new legislation is due to come into force on 6th April and will affect all new or renewed Assured Shorthold Tenancies from that date. It stipulates that:
From 6th April, all landlords whether they let their property privately or through an agent - will be legally required to ensure the safekeeping of their tenant’s deposit by joining a statutory Tenancy Deposit Scheme. There are two different types of scheme available one Custodial Scheme, which is free of charge for landlords and tenants, and two Insurance Based Schemes, which are free for tenants but premiums are charged to landlords or their agents.
Landlords must provide their tenant details of where the deposit is being held, who the scheme administrator is and what the procedures are for releasing the deposit if there is a dispute. This information must be provided within 14 days of the start of the tenancy.
At the end of the tenancy, the deposit will only be released to the tenant, landlord or both - if there is mutual agreement by both parties. If there is a dispute, it will be settled by an alternative dispute resolution service, (ADR), which should be faster and cheaper than taking court action, provided both parties agree to use this service. If not, the dispute will go to the Courts to decide.
Any undisputed deposit must be returned to the tenant within 10 working days of the end of the tenancy.
Penalties for landlords not complying with the above regulations are harsh: The Court will order repayment of the deposit to the tenant, leaving the landlord with nothing; the Court will also order the landlord to pay 3 times the deposit to the tenant as compensation for not holding it correctly in the first place, and could also order further costs. Whilst non-compliant, the landlord will forfeit the right to serve a Section 21 Notice to repossess the property and will only be able to regain possession if the tenant surrenders the property or significantly breaches the Tenancy Agreement.
Yet Leaders believe many landlords, tenants and agents are not aware of the requirements of the legislation and how it will affect them, and are advising landlords and tenants to take care when choosing their letting agent.
Says Leaders managing director, Paul Weller: After decades of campaigning for more regulation in the industry, Leaders fully supports the intent behind the TDPS, which we hope will raise standards in the private-rented sector to the benefit of tenants and landlords alike.
However, it is important to be aware that just because a landlord or agent may be a member of a statutory deposit protection scheme which are open to everyone without stipulating minimum standards - it does not necessarily mean that they understand or will comply with all the complex legislation governing letting, or that they will adhere to best practice.
For example, at the heart of the TDPS is the stipulation that the deposit cannot be released from the scheme at the end of the tenancy to either the landlord, tenant or both - unless both parties agree. Yet unbelievably, the TDPS legislation does not actually require that an inventory be drawn up at the start of the tenancy, a document that we know from experience is essential to minimising the chances of a dispute over the deposit at the end of the tenancy.
Without an accurate and detailed inventory, it will be impossible to agree whether the property has been left by the tenant in a reasonable condition at the end of the tenancy, and therefore to convince the scheme which party the deposit (or part of it) should be fairly released to.
To avoid problems and worries when letting or renting a property, Leaders recommend that landlords and tenants choose only an experienced ARLA or RICS member letting agent with a track-record in providing a professional and high quality service. Like Leaders, the agent should be a specialist in letting and able to demonstrate a thorough understanding of all legislation affecting lettings, not just the TDPS.
To help promote a clearer understanding of the TDPS and all its requirements, Leaders are running a series of TDPS Open Days and Evenings at their branches across the South East. For more information about these events please email firstname.lastname@example.org or Tel: 01903 837700.
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