In April 2007 the law changed in respect of how tenant’s deposits are held
In respect of most new tenancies granted after 6 April 2007, Landlords should be aware that where a deposit is held for rent payable under an Assured Shorthold Tenancy, that deposit should be held by an approved Tenancy Deposit Scheme.
The Scheme is operated by a small number of private companies who have been awarded the contracts for doing so by the Government. The selected companies operate the schemes in two ways.
Only one company currently operates a “custodial” scheme where the tenant’s deposit is physically deposited with that company until the end of the tenancy. The other companies operate an “insurance backed” scheme where a Landlord essentially pays a membership or insurance fees to cover misappropriation of tenant deposit funds.
Both types of scheme are integrated with a dispute resolution process to ensure that any disputes relating to release of the deposit are dealt with quickly and effectively.
If you are a Landlord, it is your responisbility to ensure that any deposits collected by your agent (in respect of new lettings from April 2007) are held pursuant to one of the authorised Tenant Deposit Schemes. Failure to do so could mean that a Landlord is unable to regain possession of the property in the event of default by the tenant.