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Safeguarding Bonds and Deposits

The Housing Act 2004 Part 6. From the 6th April 2007 all landlords entering into a new tenancy agreement will be required to place any deposit taken with a Government authorised Scheme. This will safeguard the money and offer independent adjudication in the event of any dispute.

Tenancy Deposit Protection will apply to all new assured short-hold tenancies in England and Wales where a deposit is taken.

Tenancy Deposit Schemes - Who will they affect?

 

From 6th April 2007 The 2004 Housing Act requires that where landlords take a bond for an assured short hold tenancy they must deposit this bond with one of three approved organisations, these organisations have been awarded contracts by the Government. Details are as follows

Computershare Investor Services Plc will run the single custodial deposit scheme, with the Chartered Institute of Arbitrators providing the Alternative Dispute Resolution (ADR) Service. (Free service to landlords and is financed by the interest from the money deposited)

The Dispute Service Limited will run an insured scheme directed primarily at letting agents. It will also run the scheme's ADR. (Fee payable)

Tenancy Deposit Solutions, a consortium of the National Landlords Association and Hamilton Fraser Insurance Services Plc will administer an insured scheme, directed primarily at landlords. The Chartered Institute of Arbitrators will provide the ADR service. (Fee payable)

A landlord will not be able to take a deposit in respect of an assured short-hold tenancy unless it is to be covered by a TDS (Tenancy Deposit Scheme)

A landlord will have to:

1. Deal with a deposit in accordance with an authorised scheme,
2. Comply with the initial requirements of a scheme within 14 days,
3. Give the tenant the appropriate information relating to the deposit within 14 days of receiving the deposit.

 

The landlord decides which scheme he wishes to use.

The schemes themselves need to advertise widely and raise their profile to ensure landlords are aware of them.

The landlord has 14 days to notify the tenant of which scheme he is using if he fails to do this the tenant can apply directly for a court order for the landlord to repay the deposit to that person or pay it into a custodial scheme. If the landlord fails comply by the date of the court hearing the court MUST make the order as requested and order the landlord to pay the applicant an amount equivalent to THREE TIMES the deposit within 10 days.

Option 1; The custodial scheme - most tenancies will be covered by this scheme, the landlord pays over the deposit to a third party custodian (as above). This custodian holds the deposit until he has written permission from both landlord and tenant that there is a satisfactory end to the tenancy. Any disputed amounts will be held whilst the dispute is resolved.

Option 2. The insurance scheme - any landlord wishing to use this scheme would have to be a member of an accredited landlord organisation. In this case the landlord keeps the deposit and participates in insurance arrangements, which will assure the return of the deposit (or part of it) to the tenant when he is entitled to it. The scheme will then hold the deposit until the dispute is settled. There is a fee payable for this service.

The penalties for landlords that do not comply are that landlords' can be fined up to three times the size of the deposit and lose some rights to get their property back at the end of the tenancy (ie Section 21 Notice cannot be served simply because the fixed term of the tenancy has expired). Applies to ASTs only.

Tenancy Deposit Protection will replace voluntary schemes. Voluntary schemes will not be permitted to take new deposits in England and Wales from 6th April 1007.

Some local authorities operate rent deposit schemes. Where a rent deposit scheme actually pays money to the landlord on behalf of the tenant, then this will need to be protected by TDP. However, where the rent deposit scheme offers a letter of guarantee, no money passes to the landlord, so TDP will not apply.

Landlords and tenants can contact Tenancy.deposits@communities.gsi.gov.uk for further info.

Tenancy Deposit Protection team telephone 0207 944 4400

The Hambleton District Council Bond Scheme

The council offers assistance to people who are homeless or threatened with homelessness and are vulnerable in the form of the Bond Scheme. This can be offered if you have no means of raising a deposit for a new assured short-hold tenancy up to a maximum of £500.
The Bond is paid directly to the landlord of the property and repaid by the tenant over a agreed period of time.
If you feel you may need this assistance please contact the housing department to find out if you are eligible.

housing@hambleton.gov.uk

Tel 0845 1211 555