30th April 2007

From 6th April 2007 all deposits taken by Landlords for tenancies which are assured shorthold tenancies must be protected by a tenancy protection scheme.

• Landlords are able to choose between two types of schemes: custodial scheme or insurance based scheme.

1) Custodial scheme
This is where the Tenant pays the deposit to the Landlord, the Landlord then pays the deposit into the scheme. At the end of the tenancy, if the Landlord and Tenant agree how the deposit is to be divided, they should tell the scheme which then returns the deposit.
If there is any dispute, the scheme will hold the deposit until the Court or any other dispute resolution service decides what is fair.

2) Insurance based scheme
This is where the Tenant pays the deposit to the Landlord, the Landlord keeps the deposit and pays a premium to an insurer. At the end of the tenancy, if the Landlord and Tenant agree how the deposit should be divided, the Landlord should return the amount of the agreed deposit.
If there is a dispute, the Landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.

• Landlords should inform the tenants of what scheme they are using.
• In each scheme, the deposit must be returned within 10 days of the Landlord and Tenant’s agreement or within 10 days following notification of a Court's decision.
• Under the new rules a Landlord may not serve notices on a Tenant until the deposit has been paid into one of the above schemes.

For further information on the above please contact Lucy Hollandon 0161 834 2324 or lholland@lopianwagner.co.uk.