Overview of Tenancy Deposit Protection

Introduction

Tenancy Deposit Protection (TDP) adds to measures, set out in the Housing Act 2004, to raise standards in the private rented sector. Those measures include licensing multiple occupancy homes and new safety rules.

TDP applies to all assured shorthold tenancies (ASTs) in England and Wales, where a deposit is taken. Virtually all new contracts to let a property are ASTs.

TDP started on 6 April 2007 and applies to all new ASTs from that date.

There are two main aims:

to ensure good practice in deposit handling, so that when a tenant pays a deposit, and is entitled to get it back, he or she can be assured that this will happen
to assist with the resolution of disputes by having an alternative dispute resolution (ADR) service. It will also encourage tenants and landlords to agree - at the start of the tenancy - the condition and contents of the property

Tenancy Deposit Protection in summary

landlords and agents are required to protect their tenants' deposits under a statutory tenancy deposit scheme
this means that deposits are safeguarded
if tenants have kept the property in good condition and paid the rent, and made sure that any other charges due under the tenancy are up to date, they will be able to get their deposit back
the schemes offer a free service to assist in resolving disputes

The legislative background to Tenancy Deposit Protection

Statutory Instruments relating to the implementation of the Tenancy Deposit Schemes and which apply to England and Wales were made, and published on 15 March 2007.

Tenancy Deposit Schemes are used to safeguard tenancy deposits paid in connection with shorthold tenancies. A shorthold tenancy is defined in section 212 (8) of the Housing Act 2004 as being an assured shorthold tenancy within the meaning of Chapter 2 of Part 1 of the Housing Act 1988.

The Statutory Instruments are available on the Office of Public Sector Information website as follows:

The Housing (Tenancy Deposit Schemes) Order 2007 - No 796 (external link)

The instrument makes amendments to Schedule 10 of the Housing Act 2004. The four main changes which set out in the instrument are as follows:

allowing either the landlord/agent or the tenant to claim the return of all or part of a deposit held in the custodial scheme without agreement from the other party if that party is not contactable or being uncooperative (custodial scheme only)
cancellation of individual deposit protection or membership in an insurance based scheme and enabling protection in another scheme (insurance based scheme only)
making Alternative Dispute Resolution the default scenario for dealing with disputes when the landlord/agent or tenant is contactable but silent as to how he wishes to resolve the dispute (custodial and insurance based schemes)
a general power for the scheme administrators to enable the adjudicator tasked to deal with disputes referred to the scheme's dispute resolution service to decide whether or not it is appropriate for him to deal with a dispute or continue to deal with one, in certain circumstances (custodial and insurance based schemes)

The Explanatory Memorandum and Regulatory Impact Assessment is available at: www.opsi.gov.uk/si/em2007/uksiem_20070796_en.pdf (external link).

The Housing (Tenancy Deposit) (Prescribed Information) Order 2007 - No 797 (external link)

The instrument sets out the prescribed information which a landlord/agent must pass onto the tenant at the beginning of the tenancy if he receives a tenancy deposit (ie within 14 days of the landlord/agent receiving the money from the tenant).

The Explanatory Memorandum and Regulatory Impact Assessment is available at: www.opsi.gov.uk/si/em2007/uksiem_20070797_en.pdf (external link).

The Housing (Tenancy Deposit) (Specified Interest Rate) Order 2007 - No 798 (external link)

The instrument sets out the interest rate which will be applied to a tenancy deposit that is safeguarded in the custodial scheme, when it is repaid to the person entitled to it.