Under the provisions of the Housing Act 2004 every Landlord or Letting Agent that takes a deposit for an Assured Short-hold Tenancy in England and Wales must join a Tenancy Deposit Scheme. The new regulations came into effect from April 6, 2007. The purpose of this regulation is to ensure good practice. The secondary purpose of the new regulations is to try and keep disputes between Landlords and Tenants out of the courts by encouraging alternative dispute resolution.

How does it work

The Tenant pays over the deposit in the usual way when the Tenancy Agreement is signed. The Landlords Agent then has 14 days from the commencement of the Tenancy to provide the Tenant with details of the scheme that they are using (known as the prescribed information). If there is no dispute at the end of the Tenancy the deposit will be returned to the two parties as agreed. If a dispute has arisen then the parties will be invited to make use of the Alternative Dispute Resolution process that is provided free within the scheme. Should the parties opt for Alternative Dispute Resolution they will be bound by its decision with no redress to the courts.There are two types of scheme; insurance backed or custodial. Under the insurance backed scheme the Landlords Agent on his behalf pays a premium to the scheme but retains the deposit whereas with the custodial scheme the whole deposit is transferred to the scheme within the 14 day timescale. If a Landlord or their Agent does not protect the Tenants deposit and provide the Tenant with the prescribed information within the 14 day timescale the Landlord will lose their right to regain possession of the property under Section 21 (notice only) instrument. If the Tenant applies to court for their deposit to be protected and it is shown that the Landlord has not complied with the scheme the court will order the Landlord pay the Tenant three times the deposit amount within 14 days.

Custodial Scheme

The Deposit Protection Service (The DPS) - This is the scheme used at BrightWater.