Those of you who have tenants on assured shorthold tenancies as part of your farm diversification projects need to be aware of the major change to the way in which tenants’ deposits must be handled. The change affects all new assured shorthold tenancies entered into after 6 April 2007 but does not affect agreements made before this date unless there is an effective re-let.
Since 6 April 2007, landlords of a residential property let on an assured shorthold tenancy have to join a Tenancy Deposit Scheme (TDS) when the tenant pays a deposit.
Landlords can choose between two types of TDS: –
- a custodial TDS where the landlord pays the tenant’s deposit to a scheme administrator (within 14 days of receipt) who then holds the money until the end of the tenancy, or
- an insurance TDS where the landlord keeps the deposit but insures the possibility of any balance owing to the tenant not being returned to the tenant at the end of the term through a scheme administrator.
The custodial TDS will be free to use but the insurance TDS will incur a fee payable by the landlord.
Three companies, established by the government to act as scheme administrators, have set up their own schemes: The Deposit Protection Service (www.depositprotection.com) is the only provider of the custodial TDS, whilst both The Tenancy Deposit Scheme (www.tds.gb.com) and Tenancy Deposit Solutions Limited (www.mydeposits.co.uk) will run insurance TDSs.
Landlords need to provide tenants with key information about the TDS, including the contact details for the scheme administrator; the procedure for the repayment of all or part of the deposit; what happens if there is a dispute about the deposit; and the circumstances in which landlords can retain all or part of the deposit. Landlords also have to certify that the key information provided is correct and that they have asked the tenant to sign a document containing the key information as confirmation of this information.
All schemes provide free alternative dispute resolution services which may help to avoid court proceedings in relation to deposits.
Landlords who do not comply with the TDS face sanctions. This could lead to landlords not being able to recover possession of their property or could be fined an amount equivalent to three times the deposit. Therefore, if you haven't joined the Tenancy Deposit Scheme, now is the time to do so.
For more information or advice, please contact
Jennie Loynes on 01926 883021.
