Back to Blog

What is a Tenancy Deposit Scheme?

By Professional Support Lawyer, Commercial Property

Welcome to the first of three articles discussing some important issues landlords of residential premises need to consider. This blog will cover the Tenancy Deposit Scheme.

The Tenancy Deposit Scheme (TDS)

Anyone who lets out a property to a residential tenant will know that they must keep any deposit they receive in a tenancy deposit scheme (TDS). This has been the case since April 2007. Landlords must put the tenant’s deposit in a government-backed TDS within 30 days of getting it.

The schemes were introduced to protect both landlords and tenants. Landlords want to ensure that they are not left out of pocket when a tenancy expires. Tenants are all too aware of unscrupulous landlords who fail to return deposits. Landlords cannot get around the TDS requirements by describing a deposit as something else. This means, that as long as it is taken as security against the tenant’s liabilities, it will be a deposit.

In addition, landlords must supply the tenant with prescribed information within 30 days of receiving the deposit. This includes general information about the scheme and specific information about the deposit itself (such as the amount of the deposit and the landlord’s details and information about when the landlord can retain all or part of the deposit).

As a landlord, you must bear in mind that penalties for non-compliance with these requirements are severe. A court can order the landlord to pay the tenant up to three times the amount of the deposit. These penalties apply even if the landlord subsequently complies with the requirement. As a result, landlords can find themselves in situations in which the deposit has been returned to the tenant but the tenant can still pursue them for up to three times the amount of the deposit. Additionally, landlords may be prevented from recovering possession of the property from the tenant.

A cautionary note

In many circumstances, a landlord will appoint an agent to act on its behalf. If an agent receives a deposit without protecting it, it may be liable to pay the penalties itself. However, the tenant may still decide to pursue the landlord. Even though the money is being held by the agent, the landlord may still be liable to pay the penalties. The reasons for this are as follows:-

• Firstly, the agent is acting as the landlord’s agent;

• Secondly, because the legislation provides that the landlord can be ordered to pay the fine.

Practical consequences

Landlords may have to pay for the consequence of agents failing to comply with the TDS requirement. For this reason, landlords must use agents that they know and trust and consider getting the agent to confirm in writing that they have complied with the TDS requirement.

If you would like legal advice as a landlord or tenant please get in touch with our expert team of Property Lawyers at Slater and Gordon UK. Call us on freephone 0800 916 9083 or contact us online and we will call you.

Property

Comments