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Deposits taken by landlords or letting agents after 6th of April 2007 as listed below must be protected within 14 days. If the landlord fails to protect the deposit than the service of any section 21 notice may be deemed invalid and the court may dismiss a claim made under section 21. Once the deposit is protected the landlord must provide the tenant with the relevant information that the deposit has been protected.
There are at present two types of tenancy deposit protection schemes available for landlords (1) insurance-based schemes (2) custodial schemes. All schemes should offer a free dispute resolution service.
Insurance-based schemes
The tenant pays the deposit to the landlord.
The landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme.
Within 14 days of receiving a deposit the landlord or agent must give the tenant the details about how their deposit is protected including:
The contact details of the tenancy deposit scheme selected.
The landlord or agent’s contact details.
How to 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 At the end of the tenancy:
If an agreement is reached about how the deposit should be divided, the landlord or agent returns all or some of the deposit.
If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.
Custodial schemes
The tenant pays the deposit to the landlord or agent.
The landlord or agent then pays the deposit into the scheme.
At the end of the tenancy:
If an agreement is reached about how the deposit should be divided, the scheme will return the deposit, divided in the way agreed by both parties.
If there is a dispute, the scheme will hold the deposit until the dispute resolution service or courts decide what is fair.
The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant or landlord if the tenant isn’t entitled to it.
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