What is the Deposit Protection Service?
The Deposit Protection Service (The DPS) is the Government approved custodial
tenancy deposit protection scheme. Tenancy Deposit Protection (TDP), as set out
in the Housing Act 2004, requires that all agents/landlords protect their
tenants' deposits under a statutory tenancy deposit scheme within 14 days of
receiving a deposit. The DPS will safeguard that deposit throughout the period
of the tenancy and repay the funds to the appropriate parties in accordance with
their instructions at the end of the tenancy period. The DPS is the only
custodial deposit protection scheme, is free to use and open to all
agents/landlords. The service is funded entirely from the interest earned from
deposits held. Agents/landlords can register and make transactions online, but
paper forms are also available. The scheme is supported by a dedicated call
centre and an independent Alternative Dispute Resolution (ADR) service.
Why has this legislation been introduced?
The Government has recognised that a proportion of deposits taken have been
unfairly withheld at the end of the tenancy. One of the primary objectives of
the introduction of the Tenancy Deposit Protection is to raise standards in the
lettings industry and ensure even-handed treatment of tenants at the end of the
tenancy. It encourages agents/landlords to set up tenancies correctly through
the use of formal tenancy agreements, inventories, condition reports and other
necessary documentation. The legislation aims to ensure good practice in deposit
handling, so that when a tenant pays a deposit and is entitled to get it back,
he or she can be assured that this will happen, and also to assist with the
resolution of disputes by having an Alternative Dispute Resolution (ADR)
service. It will also encourage tenants and agents/landlords to agree - at the
start of the tenancy - the condition and contents of the property.
Who is responsible for securing deposits?
Under the Housing Act 2004, the landlord is responsible for protecting the
deposit. If the landlord has instructed an agent to take the deposit, the
ultimate responsibility will remain that of the landlord. The landlord must
ensure that the agent is instructed to deal with the deposit in accordance with
the legislation.
Who can use The DPS?
The DPS is open to all agents/landlords. There are no membership fees or
qualifying criteria to fulfil.
What constitutes a deposit?
A deposit taken in connection with an Assured Shorthold Tenancy cannot consist
of any property other than money under the Housing Act 2004.
A deposit is intended to be held as security for:-
- the performance of any obligations of the Tenant, or
- the discharge of any liability of his or hers, arising under
or in connection with the tenant
What happens if a deposit has not been protected?
Where a Landlord fails to comply with Tenancy Deposit Protection, there are two
sanctions:-
- Unable to use Section 21 notice Currently, a landlord can
serve two months' written notice in the prescribed form under Section 21 of
Housing Act 1988 on a tenant in order to terminate a tenancy at the end of a
fixed term, or after a fixed term has expired. If necessary, a landlord can
obtain an order for possession of an Assured Shorthold Tenancy in the County
Courts under Section 21 of the Housing Act 1988. However, where a landlord fails
to comply with Tenancy Deposit Protection, no Section 21 notice may be given in
relation to the tenancy until such time as the legislation is complied with.
- Payment to the Tenant Tenants can make an application to a
County Court under Housing Act 2004 if they believe that their deposit is not
being safeguarded, or where they have not been given the prescribed information
about the scheme in which the deposit is safeguarded within 14 days of the
landlord receiving the deposit.
Where the court is satisfied that the landlord has failed to comply with these
requirements, or the deposit is not being held in an authorised scheme, the
court must either order the landlord to repay the deposit within 14 days of the
making of the order, or order the landlord to pay the deposit to the custodial
scheme administrator.
The court must also order the landlord to pay the tenant three times the deposit
amount within 14 days of the making of the order.
When does Tenancy Deposit Protection (TDP) not apply?
TDP only applies to deposits taken in connection with Assured Short hold
Tenancies (ASTs). The AST is one of the most common forms of tenancy in the
private rented sector. The AST is defined by Housing Act 1988 and there are
exempted occupations which cannot be ASTs, and to which TDP does not apply. The
exemptions are where the tenancy began before 15th January 1989, where the
annual rent exceeds £100,000 or where the landlord is resident in the property.
Is the deposit I secure with The DPS safe?
TDP only applies to deposits taken in connection with Assured Shorthold
Tenancies (ASTs). The AST is one of the most common forms of tenancy in the
private rented sector. The AST is defined by Housing Act 1988 and there are
exempted occupations which cannot be ASTs, and to which TDP does not apply. The
exemptions are where the tenancy began before 15th January 1989, where the
annual rent exceeds £100,000 or where the landlord is resident in the property.