The Tenancy Deposit Scheme (TDS) has been in place since 6 April 2007, when it was brought into force by the Housing Act 2004. It was created to protect deposits paid by tenants who have an Assured Shorthold Tenancy (AST) and provide a fairer system to settle disputes at the end of the tenancy.

Not all deposits are protected by the scheme, only those where the tenant is renting a home from a private landlord or letting agent on or after April 2007, and the tenancy is an AST.

Initially only applying to ASTs defined by the Housing Act 1988 (tenancies where the annual rent is less than £25,000 per annum), changes in October 2010 brought about by the Assured Tenancies (Amendment) (England) Order 2010, meant that the Tenancy Deposit Scheme now applies to more tenancies than it did previously, as the legislation has raised the annual rental threshold for assured shorthold tenancies from £25,000 to £100,000.

The new threshold now applies to existing tenancies where the deposits were taken after 6 April 2007, not just those created after October 2010. This means that a contractual tenancy could have automatically converted to an AST from 1 October 2010. So, landlords holding deposits in respect of existing Common Law Tenancies which continue past 1 October 2010 and have rents between £25,000 and £100,000 will need to not only ensure that their tenant’s deposit is placed in one of the three approved schemes but that they have also provided the necessary prescribed information to the tenant.

The following is a summary of the prescribed information for the purposes of section 213(5) of the Housing Act 2004:

- details of the paid deposit, the address of the property to which the tenancy relates, and the name, address, telephone number, email address and any fax number of the scheme administrator of the authorised tenancy deposit scheme applying to the deposit;
- the circumstances when all or part of the deposit shall be retained by the landlord
- confirmation (in the form of a certificate signed by the landlord) that the information provided is correct, and that the tenant has been given the opportunity to sign any document containing this information
- any information contained in a leaflet supplied by the scheme administrator to the landlord which explains the operation of the relevant Housing Act provisions.

In the event of non compliance, a landlord can no longer rely on Section 21 of the Housing Act 1988 (whereby they are able to give 2 months’ notice to recover possession) and may now face a claim in the County Court from a tenant requesting that the deposit is either placed into one of the three approved schemes or that it is returned in full and a claim for statutory compensation of 3 times the amount, which should have been put into the scheme.

There are still relatively few reported cases considering how strictly the provisions relating to the Tenancy Deposit Scheme are being interpreted and in particular there are questions as to whether the landlord can avoid the penalties as long as he has complied with the scheme requirements by the time he reaches the court. However either way, landlords who do not comply with the scheme could be ordered to pay the tenant’s legal costs as well as their own in addition to the statutory compensation.

Contact Emma Wraight on 01245 453849 or emma.wraight@birkettlong.co.uk