Deposit protection schemes are also referred to as, tenancy deposit protection schemes, deposit protection services, landlord deposit schemes, deposit guarantee schemes and rent deposit schemes.
But how do they work, what should you be aware of, and when and where do they apply?
The deposit protection scheme is a vital safeguard for the millions of tenants renting their property across the UK.
In this article we will explain what the deposit protection scheme is, when it applies, what you need to know if you're a landlord, and, if you're a tenant, what to do if you enter a dispute with your landlord.
Renting is big business in the UK, with over 50% of households in London alone renting. With limited space to expand and an economic recovery underway the rental market is likely to expand even further as fewer and fewer people can afford to get on the housing ladder.
As with all financial transactions, renting involves an element of trust, particularly when such large sums of money and something as valuable as your house are at stake, which is why deposits are so vital.
A deposit is equity that can be called on by those renting out their homes to cover any shortfall in rent, damage to the property, or any other financial cost caused by a tenant.
However, holding on to someone else’s money also requires a lot of trust from the tenants side. After all, what’s to stop your landlord simply deciding to keep your deposit and kick you out?
That’s where the deposit protection scheme comes in. Introduced in April 2007 after legislation contained in the Housing Act 2004, it is a legal requirement for any landlord renting out their property to place their tenants deposit in the scheme.
There are three tenancy deposit protection schemes that landlords can use:
Each rent deposit scheme is backed by the government and acts as an intermediary between landlords and tenants.
The scheme is there to assure tenants that they will get their deposit back unless they cause damage, fall behind on rent, or violate the tenancy agreement.
The Deposit Protection Scheme requires landlords to place all deposits in a scheme within 30 days of the landlord receiving the money, with proof sent to the tenant. It is also referred to as the landlord deposit scheme.
The deposit placed in the scheme is not the same as a holding deposit used to secure the property. You only have to place the housing deposit in the scheme once someone becomes a tenant.
At the end of the tenancy period the money must be returned to the tenants unless a deduction is agreed upon by both parties. In that case the remainder has to be returned within 10 days, and in cases of dispute the money is held in the scheme until the matter is resolved.
The only thing worse than handing over your deposit in the first place is the long wait at the end of your tenancy as you wait for it to be returned and certain questions come to mind. Will I get the full deposit back, if not why not, and what can I do?
In the worst case your landlord will decide to hold on to a portion of your deposit and you disagree, wither with the amount being withheld or for the reason it is being withheld.
It is for these situations that the Deposit Protection Scheme was designed, and each of the three protection schemes includes a free dispute resolution to help you come to an amicable agreement.
Keep in mind that just because your deposit is held securely, that doesn’t mean you will come to an agreement that suits you. However, at least you can be assured that your deposit won’t disappear until you’ve had a chance to challenge your landlord’s decision.
The details of the Deposit Protection Scheme your deposit has been placed into is just one of the documents your landlord must provide you within a month of moving into your new home.
They must also provide you with details of the deposit amount and how it is protected, their own name and address or that of the letting agent representing them, reasons for holding on to your deposit at the end of the tenancy, what to do to recover your deposit, and what to do if there is a dispute over your deposit.
If your landlord hasn’t placed the money in any of the protection schemes you can take the matter to county court.
You can typically end your tenancy with written notice by informing your landlord up to two months before the end of your contract.
While you may be tempted to end the contract early your landlord is entitled to request payment until the end of the contract period unless you have a break clause.
If you do try and leave early without continuing payments you owe the landlord is entitled to take this money out of your deposit.
Just because it isn’t your property doesn’t mean you don’t have rights. By law it is up to your landlord to repair anything that is broken and keep the home in good order.
This includes everything form the gutter and drains, to pipes, gas, water, wiring, sinks, baths, toilets, heaters and boilers.
It is also your landlord’s responsibility to keep your property safe, particularly around gas appliances. At least once a year your landlord must have any gas appliances inspected by a Gas Safe Register engineer.
Your landlord is also not allowed to evict you in the initial six months of your tenancy, or during your initial fixed term, unless you are behind on rent or have damaged the property.
Your landlord must also seek your permission if they want to increase your rent. Any rent increase must come at least one month in advance and must be agreed between you and your landlord in writing.
If you think a rent increase is unfair you can appeal to a Rent Assessment Committee, an independent body who will assess the proposed increase and allow you to appeal.