New research reveals that 62 per cent of landlords are failing to protect their tenants' deposits.
According to the latest figures from the Deposit Protection Service (DPS), a large proportion of landlords are not registering their tenants with the deposit protection scheme.
A total of 18 per cent of landlords are registered with the DPS, while 14 per cent use other schemes, reports 24dash.com.
Despite it being illegal not to register tenants' deposits, six per cent don't know what scheme they use.
Landlords also don't realise that if they don't protect their tenant's deposit, they may be liable to pay their tenant a fine (which is three times the amount of the deposit) and they may be unable to seek possession of the property.
Kevin Firth, client services director for the DPS, said that the figures are "staggering".
"Fifteen months after legislation was introduced, there is no excuse for failing to properly protect your tenants' deposits," he explained.
He was shocked that landlords openly admitted they were "flouting the law".
Meanwhile, the Scottish Parliament is being urged to adopt the schemes, which protect tenants at the conclusion of a contract.
Tenancy deposit schemes: What landlords need to know
The schemes
1. The Deposit Protection Service (The DPS)
This tenancy deposit scheme is the only custodial deposit protection scheme. It's free to use and it's open to all landlords and letting agents.
The money for the deposit is placed in the custody of the scheme. The service is funded entirely from the interest earned from deposits held.
Landlords and letting agents can register and make transactions online.
The scheme is supported by a dedicated call centre and an independent dispute resolution service.
This insurance-based tenancy deposit protection scheme enables landlords, either directly or through agents, to hold the deposit themselves. Letting agents can also join the scheme.
3. The Tenancy Deposit Scheme (TDS)
An insurance-backed deposit protection and dispute resolution scheme run by The Dispute Service, which builds on a scheme established in 2003, to provide dispute resolution and complaints handling for the lettings industry.
The scheme enables letting agents and landlords to hold the deposit themselves.
Information to the tenant
Within 14 days of receiving the tenant's deposit, the landlord (or letting agent) is required by law to give the tenant details about how the deposit is protected including:
- The contact details of the tenancy deposit scheme
- The landlord's contact details or those of the letting agent
- How the tenant can apply for the release of the deposit
- Information explaining the purpose of the deposit
- What to do if there is a dispute about the deposit
It's important that the landlord gives the tenant the right information; otherwise they may find that they're unable to seek possession from the tenant and they may be liable to pay the tenant a sum of money equal to three times the amount of the deposit.
Some tenancy deposit scheme administrators provide statements outlining this information to the tenant, but they are not always legally sufficient and they can cause confusion when landlords are trying to reclaim the property.
To make things easier, Lawpack has produced a Tenancy Deposit Protection Form, which outlines all the information landlords must give to their tenants. Checked by a solicitor, the form ensures that landlords are compliant with the law and it protects landlords, and their property, should anything go wrong with the tenant. It just has to be simply filled in, signed and handed to the tenant.
Exclusions to the scheme
The law regarding tenancy deposit protection schemes doesn't apply where the tenancy is not an assured shorthold tenancy (i.e. tenancies where the rent is over £25,000 per year or where the landlord is resident in the same dwelling house as the tenant).
The tenancy deposit protection scheme is only applicable in England and Wales, but the tenancy deposit scheme will be introduced in Scotland shortly.
More information
Make a tenancy agreement with Lawpack's 'Residential Lettings Kit'
Download tenancy agreements now
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