From 6th April 2007 the Housing Act 2004 comes into force relating to residential tenancies and deposits, and specifically Assured Shorthold Tenancies.
The Landlord has to choose to put the deposit into one of two schemes known as the custodial scheme and the insurance based scheme. The Landlord will have 14 days from receipt of the deposit to place it into a scheme and inform the tenant. If the Landlord does not do this the tenant can apply to court for the deposit to be repaid to him or paid into a scheme. The court can order the Landlord to pay 3 times the deposit amount to the tenant, if they fail to pay into the schemes.
Details of the schemes as follows:
Custodial Scheme
- Landlord pays the deposit into the scheme.
- At the end of the tenancy, if landlord and tenant agree how the deposit should be divided, they inform the scheme which returns the deposit in the manner agreed by both parties;
- If there is a dispute, the scheme retains the amount until the dispute resolution service or courts decide the dispute;
- Interest on deposits will be used to pay for the running of the scheme and the surplus will be paid on the amount refunded.
Insurance-based schemes:
- Landlord retains the deposit and pays a premium to the insurer,
- At the end of the tenancy, if Landlord and Tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;
- If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
- If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.
Both schemes must offer alternative dispute resolution as a method of resolving disagreements relating to proportions of deposits to be kept/returned, although its use isn’t compulsory.
For information please contact David Baybut on 01942 774180 or email dba@stephensons.co.uk