Tenancy Deposit Schemes

The biggest gripe of many tenants is the problems they face in trying to recover their deposit at the end of the tenancy. However, this may now be a problem of the past.

Tenancy Deposit Schemes (TDSs) are now compulsory for all assured shorthold tenants, meaning that private landlords can no longer take deposits from their tenants unless they belong to an approved TDS.

Currently, there are two types of TDS:

• A custodial scheme - where the landlord passes the deposit to one of three providers to which the Government has awarded contracts and which then holds it until the tenancy comes to an end, either then returning it to the landlord or tenant or, in cases of disagreement, dividing it between them



• Insurance-based schemes - where the landlord holds the deposit and pays a premium to the insurer who, at the end of the tenancy, pays the tenant if the landlord has, for any reason, misappropriated the deposit.

Once a landlord has received his tenant’s deposit he has 14 days to tell the tenant which type of scheme he has chosen. If he does not do so, the tenant can apply to the Court which can then order the landlord to pay the tenant up to three times the amount of the deposit.

As part of the whole TDS process there is provision for alternative dispute resolution if the landlord and tenant cannot agree.

For more information on TDSs and the potential problems they can cause for landlords please contact:

Michael Mitzman
Tel +44 (0)20 7440 7134
michael.mitzman@mishcon.com