► Housing Bonds/Deposits
Changes in the Law for Bonds on your Housing Contracts, coming into force from 6th April 2007.
Tenancy Deposit Schemes
All private landlords in England and Wales with assured shorthold tenancies must protect their tenants’ deposit in some way, either by taking out a special insurance or by handing out the deposit to a third party. All new tenancies (starting during April 2007 and onwards) will be affected.
How do the tenancy schemes work?
After April 2007, when you are signing a new tenancy agreement with your landlord, ask how much deposit will be protected. Your landlord can provide you with the contact details of the scheme protecting your deposit. Landlords will be able to choose between two types of scheme: a single custodial scheme and two insurance based schemes.
Custodial Scheme:
The tenant pays the deposit to the landlord;
The landlord then pays the deposit into the scheme;
Within 14 days of receiving the deposit, the landlord must give the tenant the prescribed information about the scheme being used;
At the end of the tenancy, if the landlord and tenant agree how much deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;
It there is a dispute, the scheme will hold the amount until the dispute resolution service, or the 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 interests to the tenant, or landlord if the tenant isn’t entitled to it.
Insurance Based:
The tenant pays the deposit to the landlord;
The landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme;
Within 14 days of the receiving a deposit, the landlord must give the tenant prescribed information about the scheme being used and the tenancy;
At the end of the tenancy, if the landlord and tenant agree the deposit should be divided, the landlord returns all or some of the deposit;
If there is a dispute, the landlord must hand over the disputed amount to the scheme 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.
EXAMPLE
A group of tenants pays a deposit of £1000. At the end of the tenancy, the
landlord says he wishes to keep £200 to pay for replacing damaged furniture. The remaining £800 will be returned to the tenants. The tenants disagrees, claiming the furniture was damaged when they moved in. Both parties agree to go to Alternative Dispute Resolution (ADR), so the disputed £200 will be transferred to the scheme administrator until the dispute is settled.
In each scheme, the deposit must be returned within 10 days of the landlord and tenant agreeing how the deposit should be divided, or within 10 days following notification of an ADR / Court decision.
FAQs
Q: What sort of tenancies will deposit protection apply to?
A: All deposits taken by landlords in relation to Assured Shorthold Tenancies (AST) - the most common form of Student leases. Private Halls of Residence Providers (including Liberty Living) are also covered by the legislation.
Q: Does tenancy deposit protection apply to
landlords who live overseas?
A: If a landlord lives overseas but lets a property in England or Wales on an AST and takes a deposit, he or she will have to comply with the legislation.
Q: How can tenants find out if there deposit is protected?
A: Within 14 days of receiving a deposit, landlords will have to provide tenants with details of which scheme is protecting the deposit. The scheme will be able to confirm if the deposit is protected.
Q: What happens if the landlord or tenant cannot contact the other party to agree how the deposit should be returned, or where one party is being un-cooperative?
A: If the landlord is unable to contact the tenant, he can submit a single claim indicating the reason for the claim, including evidence. If a tenant cannot contact the landlord and makes a single claim, no other reason is required and the deposit is returned. A single claim can also be made if both the landlord or tenant are contactable, but one party refuses to co-operate - either in agreeing deposit release or agreeing to resolve any dispute via ADR Court.
Q: What happens were parents pay the rent?
A: Where the deposit is paid for an assured shorthold tenancy, it would still need to be safeguarded by a scheme.
Q: How would the deposit be repaid once an overseas student has returned home?
A: Schemes will be able to return deposits into foreign bank accounts. There would be a charge for this would be need to be paid by the tenant.
