Alert to Residential Landlords: Tenancy Deposit Schemes

21 - 3 - 2007 

The Housing Act 2004 introduced a new scheme for placing tenant’s deposits in authorised designated accounts.

 This article is designed to give Residential Landlords an insight to the new scheme which becomes effective in April 2007.


Will the new scheme affect me?
If you are a Landlord granting a residential Assured Shorthold Tenancy Agreement (AST) from 6th April 2007, or renewing an AST after this date then YES. From this date it will become mandatory for a Landlord to place any deposit received from a Tenant in a TDS


Why is the scheme being introduced?
To safeguard both the Tenant and Landlord should a dispute arise at the end of the tenancy.


Are there different types of TDS?
Yes, a Landlord will have 2 options of where to place the funds: 1. A Custodial TDS – The scheme is run by a designated administrator who will retain the deposit until the tenancy is brought to an end and it is decided what it to happen to the funds. 2. An Insurance TDS – The Landlord retains the deposit in a designated account and pays a fee and insurance premium to an administrator. That fee is then used to pay the Tenant should the Landlord not hand the deposit back at the end of the term of the tenancy.


How do I set up a TDS?
There are 3 providers:

  • The Deposit Protection
  • Dispute Service Ltd.
  • Tenancy Deposit Solutions Ltd.

What do I need to do after the TDS has been set up?
Within 14 days of receipt of the funds you must pay the money into your chosen TDS. You must also provide the Tenant and any associated person (being a person paying the deposit i.e. parent) with certain prescribed information within that timeframe.


What are the penalties if I do not conform to the TDS?
You may be prevented from recovering possession of the property under a section 21 notice or you may be fined three times the amount of the deposit.


What happens at the end of the term?
If the parties cannot agree how the deposit is to be divided there will be a period of dispute resolution, if no agreement can be reached an application to court will determine how to apportion the funds.


Parts of the legislation are still in draft form but if you need any further information please do not hesitate to contact Vikki Herbert 0208 290 0440 or by e-mail: vikki.herbert@thackraywilliams.com