With affect from the 6th of April 2007 the law in the UK, with regard to the holding of tenant's deposits has changed. There is now something in place called Tenancy Deposit Protection (TDP). The two main aims of TDP are: Firstly, to ensure that tenant deposits are handled correctly. So that those that are entitled to, get their deposit back quickly and efficiently. Secondly, it aims to provide a way of assistance with resolving disputes over deposits.
If landlords want to take deposits, they will be required to join a statutory deposit scheme. TDP will be applicable for all deposits taken from tenants in assured shorthold tenancies, which these days, are by far the vast majority of tenancies – in England and Wales. The choice of which scheme to choose will fall with the Landlord: the first scheme is a single custodial scheme and the second is an insurance based scheme/schemes
The goal of the TDP is to put into place a straightforward process for all landlords to ensure tenancy deposits are safeguarded. This would obviously be of huge benefit to both landlords and tenants alike. Below is information on how these schemes will be run.
With the insurance based schemes the tenant pays the deposit to the landlord. The landlord retains the deposit and pays a premium to the insurer. Within 14 days of receiving a deposit, the landlord must give the tenant information about the scheme being used. If at the end of the tenants tenancy the landlord and tenant can agree how the deposit is to be divided between them, the landlord will then return what ever amount is due to the tenant. 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.
With the custodial scheme the tenant pays the deposit to the landlord. The landlord then pays the deposit into the scheme – the key difference to the insurance scheme. Within 14 days of receiving a deposit, the landlord must give the tenant information about the scheme being used. At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme, which returns the deposit divided in the way agreed by both parties. If there is a dispute, the scheme will hold the amount until the dispute resolution service (ADR) or courts decide what is fair. The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant or to the landlord if the tenant isn't entitled to it. In each scheme, the deposit must be returned within 10 days of the end of the tenancy, provided the landlord and tenant have agreed the amount.
The UK Property market is undergoing several changes this year along with the introduction of Home Information Packs (HIP's) the tenancy deposit protection schemes is one of the most significant ones that will affect landlords and other professionals in the property field. As always when a change is planned, the inception of the Tenancy Deposit Scheme has not been met with total enthusiasm by the property investing community. However, the idea behind it seems logical, and only time will tell whether the introduction of TDP will be of benefit to both landlords and tenants alike, or whether it will be another source of red tape that makes everyone's life more difficult and never actually accomplishes the goals it intends to.
Article Source: http://www.orbitaloc.com/
Carlton Johnson is a successful company director and author, who has a keen interest in property investing and personal development. To receive his free five part course on how to become a success in today's property market in the UK go to his website at:
www.UKPropertysuccess.com
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