The main purpose of paying a deposit is because it acts as a safeguard should the tenant cause any damage to the property or fail to pay the rent.
Most landlords and letting agents ask tenants for a deposit as security against damage or non-payment of rent. If you’ve paid a deposit on or after 6 April 2007, or before that date but renewed your tenancy since then, your landlord must use a tenancy deposit protection scheme to safeguard it.
Some unscrupulous landlords are either very slow to return deposits at the end of the tenancy or make unfair deductions. The purpose of the regulations is to ensure good practice in this area and try to keep disputes between landlords and tenants out of the courts by encouraging alternative dispute resolution.
As part of the Housing Act 2004 the Government introduced tenancy deposit protection for all shorthold tenancies (AST’s) in England and Wales where a deposit is taken. From April 6th 2007, all deposits paid under an assured short hold tenancy should have been protected within 14 calendar days of receipt by the landlord, this has now increased to 30 days.
If you rent your home on an assured short hold tenancy that started after 6th April 2007 the landlord must put the deposit in a government backed tenancy deposit scheme (TDP). The landlord can also accept valuable items (e.g. car, watch) as a deposit instead of money, but they won’t be protected by a scheme.
The aim of the legislation is to ensure that tenants who have paid a deposit to a landlord or letting agent and are entitled to receive all or part of it back at the end of that tenancy actually get it back.
The legislation covers all deposits taken on an assured shorthold tenancies in England and Wales.
What is a Tenancy Deposit Protection Scheme?
A tenancy deposit protection scheme safeguards your deposit. This means you can be sure that you will get your deposit back at the end of the tenancy, as long as you are entitled to it. For example, your landlord may be entitled to some of the deposit if there is any damage or if you haven’t paid all your rent.
The scheme also provides a service to sort out disagreements about the deposit without going to court. There are two types of scheme and it is up to your landlord to choose which one they want to join. One type of scheme is a custodial scheme and the other is insurance-based. The main difference is that: in the custodial scheme, your landlord pays the deposit into the scheme and the scheme looks after it in an insurance-based scheme, your landlord keeps the deposit, but has to pay to use the scheme.