Once in receipt of the deposit, landlords must place it into what is known as a Tenancy Deposit Protection Scheme. This is a government-backed scheme which ensures that tenants will receive back their deposit at the end of the tenancy. Unfortunately, a lot of landlords think that it is enough to keep the deposit in a separate bank account or at least clearly marked as a deposit and are unaware that this is a legal requirement. The deposit must be paid into such a scheme within 30 days of receiving it and the landlord must provide the tenant within the same period with the following information:
• The amount of the deposit which has been protected
• the name and contact details of the Tenancy Deposit Protection Scheme and its dispute resolution service
• how to apply to get the deposit back at the end of the tenancy
• what to do if the tenant is unable to contact the landlord at the end of the tenancy regarding the deposit
• what to do if there’s a dispute over the amount of deposit to be returned at the end of the tenancy
If a deposit has not been protected in such a way, the tenant has a right to apply to the Court for compensation. They have two options:
• If they apply to the Court before the tenancy has expired, the Court can order that the landlord either protects the deposit in a scheme within 14 days or return the deposit to the tenant.
• If the tenancy has expired, the tenant can apply to the Court for an order to be made for the landlord to pay up to 3 times the original deposit amount to the tenant.
Both situations are particularly problematic for landlords; they will either end up without protection against potential damage to their property caused by a tenant or in fact will have to pay a hefty sum for not complying with the law.
It is therefore very important for landlords to comply with the requirement for deposit protection if they do not wish to pay out compensation to the tenant or prevent their ability to evict the tenant in the future.