Tenancy Deposit Protection legislation was introduced as of 6th April 2007 and applies to all new Assured Shorthold Tenancies created on or after that date. The legislation, which forms part of the Housing Act 2004, does not affect tenancies commencing before that date, or those that have carried over onto a Periodic Tenancy (month to month) after April 6th 2007, but affects all new tenancies and renewal of tenancies (i.e. if landlord and tenant agree a new fixed term and a new agreement is signed).
All new (or renewal) deposits must be registered with one of three approved schemes under the act. If there is no dispute at the end of tenancy the deposit is returned (or retained, or part-retained, if the tenant agrees) as usual. If agreement cannot be reached, the disputed amount will be dealt with under the terms of the scheme in question and neither party will receive any of the disputed amount until agreement is reached. The exact provisions of the scheme for dealing with a dispute will be notified to you at the time, but will include free referral to Alternative Dispute Resolution (ADR, or arbitration) to settle the matter.
If a landlord accepts a deposit they are obliged to place it in a scheme and supply the tenant with legally prescribed information relating to the scheme within 14 days of the commencement of tenancy or face a fine of three times the deposit (amongst other penalties).
If there is a dispute at the end of the tenancy you may be heavily reliant on your initial inventory to prove the condition of the property at the start of the tenancy and we therefore recommend a thorough inventory is carried out (ideally including photographs) and signed by the tenant. Any notes on condition part way through the tenancy or at the end are also going to important as arbitration will not be carried out face to face, and will involve sending off written evidence.
Peter Large Lettings are members of the Deposit Protection Service (DPS). Any landlords wishing free advice can telephone Peter Large Lettings on 01745 336699.
More details can be found at www.direct.gov.uk/tenancydeposit.