Rent deposit protects landlords from tenant’s failure to pay rent and from damages to the property that the residents live in. This money is paid at the beginning of the tenancy. It is usually equal to the rent paid by the tenant. Rent deposit does not belong to the landlord. It may be reclaimed by the tenant at the end of the tenancy period. The landlord merely holds the deposit until the end of the tenancy. This money is protected in a tenancy deposit scheme. The scheme ensures that the landlord does not use these funds until he is allowed by law. This system also ensures that the tenant is repaid his deposit on time.
Tenancy deposit schemes are only available for assured shorthold tenancy (AST). AST is the most common form of tenancy in the United Kingdom. AST was instituted on 15 January 1989. An AST tenant is one who considers his current residence as his main home. The property that the tenant lives in is owned or managed by a private landlord or a housing association. The private owner of an AST should not be a resident landlord. Rents charged in AST must fall within the range of £250 to £100,000 per year. The property should not be used for business, and neither should it be a licensed premise.
Tenancy Deposit Protection (TDP) Schemes
Landlords are required by law to protect the deposit within the first thirty days of tenancy. There are two types of tenancy deposit scheme. One of these is the custodial scheme. In the custodial scheme, the landlord files the tenant’s money into a TDP scheme which then protects the money. TDP scheme is a government project that protects tenancy deposits. The other deposit protection scheme is the insurance-based scheme. In the insurance-based scheme, the landlord holds the deposit but pays insurance to the scheme.
The owner must inform his tenant the type of deposit scheme he used to protect the money. He must also disclose to the deposit scheme and the tenant all prescribed information. Specified information include the amount of deposit the tenant paid him, the address that the deposit relates to and the manner in which he will repay the deposit at the end of the tenancy. A landlord who fails to disclose this information can be taken to court by their tenant. The landlord also loses his right to evict a tenant if he fails to disclose this information and cannot repay the deposit.
Return of Deposits
Deposits are returned to tenants within ten days of the end of the tenancy. The only exception is when the tenant fails defaults in rent payment or if he damages the property. The tenant of a deposit that is protected by the custodial TDP scheme is required to fill a form before getting his money back. This form enables the scheme to know that the tenant and his landlord have agreed on the amount of deposit to be repaid. In the insurance plan, an owner is required to repay the deposit directly to his tenant. Sometimes disputes arise as to how much deposit the landlord should give back. These typically occur when the tenant damages the property, but the cost of repair is less than the amount of deposit. It is the responsibility of TDP schemes to resolve such disputes.