The coming year will see the implementation of the last major provision of the Housing Act 2004 and arguably one of the most important measures for a growing group of consumers –  tenants in the private rented sector. 

Tenancy deposit protection, which will safeguard any deposit paid by a tenant to a landlord under an Assured Shorthold Tenancy will be required by law for all new tenancies in England and Wales from 6 April 2007.

David Salusbury, chairman of the National Landlords Association, said, “There are 2.5 million households that rent privately in England and Wales, representing nearly 12% of the total – that’s one in eight households. The vast majority of British people live in rented homes at some point in their lives, so anything that affects tenants is a major concern to the media and to consumers generally.”

According to government statistics, 19% of deposits are only returned in part and 11% not at all. 17% of tenants who had part or all of their deposit withheld felt that all, or some of, the deposit had been withheld unjustifiably,

David Salusbury commented: “In many of these cases the tenant has caused damage to the property or failed to clean it, and the landlord has quite legitimately withheld the tenant’s money.” 

“However, we recognise that there are rogue operators in the sector, and we want to see them rooted out.  It is because of the malpractice of a small minority that the government has decided to act, by introducing mandatory tenancy deposit protection.”

Landlords will have the option of selecting a custodial or an insurance-based scheme.  The NLA will operate the only tenancy deposit protection scheme that is specifically designed for landlords wishing to hold deposits themselves during a tenancy.  The scheme will operate under the name Tenancy Deposit Solutions Limited (TDS) and be administered by Hamilton Fraser Insurance.

Under the scheme, landlords will take the deposit from the tenant, notify the scheme administrator that the deposit should be protected and (as required by law) must give details to the tenant about the scheme being used within 14 days.

Landlords who fail to join a tenancy deposit protection scheme can be fined up to 3 months’ rent on each tenancy and will be unable to recover their property through the courts.

David Salusbury continued: “The repercussions of non-compliance are severe.  We strongly urge landlords to prepare themselves by selecting a suitable scheme in advance of 6 April.”

“Tenants also have a vested interest in familiarising themselves with the new procedures and ensuring that their deposit money is protected when they sign a new tenancy.  They must know their rights and insist that the landlord complies.”

“This is one of the most important changes in the private rented sector for many years.  The NLA is committed to supporting this initiative with the view to raising standards in the private-rented sector – for the benefit of both tenants and landlords.”