Since 2007, the law has required all tenancy deposits to be protected in a Government backed scheme.
There are three separate schemes that landlords can choose: My Deposits, Tenancy Deposit Scheme and Deposit Protection Service.
The rules apply to most tenants who rent their home on an assured shorthold tenancy.
If you rent from a private landlord, it’s likely that you will be an assured shorthold tenant unless you live with your landlord, are a student in halls of residence or have been told that you have another type of tenancy.
The rules state that landlords must pay deposits in to one of the above schemes within 30 days of receiving it, and must also serve the tenant with certain documents from the deposit protection scheme so that the tenant is aware of where the deposit is kept and how they can access advice.
The reason for these rules is to protect tenants’ money, and ensure they receive their deposit back at the end of the tenancy if there are no rent arrears and there is no damage to the property.
The protection schemes also provide a free dispute resolution service in the event that there is a dispute at the end of the tenancy about how much of the deposit should be refunded.
Worryingly, many landlords don’t realise their obligations and fail to follow the deposit protection scheme rules.
If a landlord fails to protect the deposit, the tenant can issue court proceedings against them for compensation.
The court has the power to order the landlord to refund the deposit and award the tenant compensation up to three times the value of the original deposit. This means that if a tenant pays a £500 deposit and the landlord does not follow the rules, the tenant can ask the court to order the landlord to refund the original £500 and pay out up to £1,500 in compensation.
Even if the landlord has followed the rules regarding protection schemes, deposits can still cause a dispute if the landlord and the tenant disagree on how much should be refunded at the end of the tenancy.
Lawfully, the landlord does have the right to retain some or all of the deposit if there are rent arrears or the property has been damaged by the tenant.
If this happens, and the landlord and tenant can’t reach an agreement between them, there are two main options available.
The tenancy deposit schemes offer a free dispute resolution service, but both the landlord and tenant must agree to use the service and agree that the decision made will be final. If the landlord won’t agree to use the dispute resolution service, the tenant can ask the court to order the landlord to refund the deposit.
Bethany Symonds is a trainee solicitor at David Gray Solicitors LLP. You can call for an appointment with Bethany or any member of the Court of Protection team on 0191 243 8160 or Chat Live 24/7 by visiting the website.