It is hard to believe that it has been two years since the introduction of the tenant deposit protection scheme (TDPS). Since then thousands of tenants have had their deposits registered with a deposit protection scheme. These schemes can protect the tenant’s deposit in one of two ways. Firstly the deposit can be paid over to the scheme in its entirety that will place the deposit in an account and will refund the deposit to the tenant or landlord at the end of the Tenancy. This is known as the custodial scheme. The other scheme is where the landlord chooses to keep hold for the deposit and pay insurance premium to the scheme whereby in the event that the landlord refuses to return the deposit to the scheme contrary to the outcome of the deposit then the scheme will pay the deposit to the tenant. The landlord will not be permitted to register a deposit with that scheme and as there are a very small number of schemes it will not be long that a landlord who willingly doesn’t return a tenants deposit will not be able to register a deposit. This will mean that this landlord will no longer be able to lawfully take a deposit from a tenant.
There are also differences in how the deposit protection schemes return deposits based on what scheme is chosen by the landlord. The schemes are at the end of the day businesses that sell deposit protection insurance. There is no doubt that the schemes offer an excellent value for money (Free) service in the form of the custodial scheme however there are definite advantages to a landlord if they chose the insurance scheme notably the ability to use the deposit as cash flow during the tenancy and the length of time required to have the deposit returned to the landlord if the tenant does not respond to a dispute raised by the landlord (Custodial scheme 30 days vs insurance scheme 7 days).
Regardless if the deposit is held in a custodial scheme or insured the schemes have to offer a free adjudication service for deposits that are in dispute. In this process the burden of evidence is on the landlord. It is the responsibility of the landlord to show that evidence of unpaid rent, damage to the property and/ or any other losses incurred due to the tenants breach of the terms and conditions of the letting agreement. It is there fore vital that the landlord keeps accurate records of rental income such as bank transfers or signed rent books showing the amount of rent paid.
It is also more important than ever that landlords take the time to record not only the contents of the property but the state and condition of the property as it is delivered into the possession of the tenant. Accurate records of receipts for items purchased for the property must also be kept, as one of the main principles of the adjudication process is landlord’s cannot benefit from betterment when replacing goods damaged or broken during a tenancy. That is that landlords cannot charge the tenant the full cost of a new item to replace old items. Adjudicators will deduct around 10% of an items value for each year it has been in the property.