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Category: Buy To Let Date: 4/19/2012
The law has changed. Section 184 of the Localism Act now formally forces landlords to protect their tenants' deposits in an approved tenancy deposit protection scheme.
The new rules came into effect on 6 April 2012, with landlords needing to get deposits into a scheme by 6 May 2012 to avoid being fined.
Landlords or letting agents have 3 different options for protecting their tenants' deposits. Tenancy deposit protection schemes protect a tenant's deposit in the event that a landlord or letting agent cannot pay or withholds a deposit at the end of the tenancy.
If there is a dispute between the landlord and tenant about the amount of deposit to be returned, the deposit protection scheme gets involved to independently review the case and give a cheaper and quicker outcome than using the courts.
There are two types of scheme – custodial and insurance-based. With a custodial-based scheme the deposit is sent to and held by the protection scheme. With an insurance-based scheme you hold onto the deposit, only sending it to the scheme if there is a dispute.
These are the only schemes that have been approved by the Government:
.
The Deposit Protection Service
MyDeposits
Tenancy Deposit Scheme
If you don't protect your tenant's deposit, they can take you to court. In addition to ordering you to place the deposit in a protection scheme, the court can fine you between 1-3 times the amount of the deposit in question.
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