Warning For Landlords Who Ignore New Tenancy Rules

06 March 2007

Landlords who ignore new rules affecting tenants’ deposits could find themselves facing a big bill.
The warning comes from Sarah Cassell, legal assistant at leading south east law firm Furley Page.

The mandatory Tenancy Deposit Scheme – delayed from October 2006 – comes into force on April 6, 2007.

Sarah comments: “After that date, all landlords requesting a deposit on a tenancy have to take part in the
scheme otherwise they could face a court order demanding they pay the tenant three times the amount of the original deposit.”

There are two types of deposit schemes:

• Custodial – where the landlord pays the deposit into the scheme and at the end of the tenancy, if both parties agree, the deposit is paid out. (Within 10 days of an agreement to terminate the tenancy or an alternative dispute resolution – ADR - or court decision.) There is no fee involved for the landlord with this option
• Insurance-based – where the landlord retains the deposit and participates in insurance arrangements which guarantee the return of the deposit at the time specified. (Within 10 days of the tenant requesting their deposit or an ADR or court decision.) In this option the landlord pays a fee which safeguards the deposit should it be misappropriated

It is up to the landlord to decide which scheme to use. If the dispute goes to ADR the decision is binding
and there is no recourse for either party to apply to Court. (If one of the parties doesn’t agree to ADR the Court
will decide the outcome.)

The Government is in the process of selecting suitable suppliers to run the schemes and it is their responsibility
to decide the fee.

And one final piece of advice from Sarah. Where a tenancy involving a deposit was granted before April 6, 2007 and renewed after 6th April on predominantly the same terms, the original deposit will need to be safeguarded by the landlord.

For more information contact  Sarah Cassell.
 

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