Tenancy Deposit Schemes
The tenancy deposit protection (TDP) schemes guarantee the deposit will be returned to the tenant at end of the tenancy if the terms of the tenancy are met and the property has not been damaged. Also, the scheme will assist if any dispute arises at the end of the tenancy.
There are 3 government approved Tenancy Deposit Schemes. These are
1. The Deposit Protection Service depositprotection.com
2. My deposits Mydeposits.co.uk
3. Tenancy Deposit Scheme (TDS) thedisputeservice.co.uk
Which one to choose?
1. Custodial scheme – Deposit Protection Service (DPS)
The Deposit Protection Service (DPS) provides the only custodial TDP scheme. The Deposit Protection Service holds the deposit money in a bank account. When the tenancy ends, it releases the deposit to the person who is entitled to it.
Overseas landlords must use the custodial DPS scheme, unless a UK letting agent manages their tenancy.
2. Insurance-based schemes – MyDeposits and Tenancy Deposit Scheme (TDS)
The only two insurance-based providers are MyDeposits and Tenancy Deposit Scheme (TDS). In this scheme, the landlord retains the tenant’s deposit and pays a premium to an insurer. If there is a dispute, the landlord must hand over the disputed amount to the Tenancy Deposit Scheme until the dispute is settled.
You can only use the TDS if you belong to an approved professional body where members must have client money protection insurance. This insurance ensures that any client money held by a business is protected, even if the person or company goes out of business. Examples of approved bodies under TDS include the Association of Residential Letting Agents, Royal Institution of Chartered Surveyors, National Association of Estate Agents and National Approved Letting Scheme.
As of April 2012, landlords have 30 days, not the previous 14 days, to register tenants’ deposits. Tenants deposits are to be lodged with a deposit scheme and the tenant must be given the following within 30 days of receipt of the deposit:
Tenants’ deposits are to be returned within 10 days of the agreement or settlement of a dispute.
Tenancy deposit schemes do not cover holding deposits. Once a tenant has signed a tenancy agreement and has become your tenant the holding deposit becomes a deposit which must then be lodged with a scheme.