In the past, a small minority of landlords wrongly withheld, or did not return tenant’s deposits, so the government introduced a statutory deposit protection scheme in the Housing Act 2004.
This safeguards all deposits taken under an Assured Shorthold Tenancy after 6 April 2007 or Assured Shorthold Tenancies that have been renewed since that date. Deposits relating to other types of tenancies are not covered.
The necessary prescribed information will be automatically provided with the tenancy agreement at the time the agreement is signed. This falls in line with legislation that dictates that prescribed information should be served and the deposit registered within 30 days of receipt of the deposit.
This is a tricky area, particularly regarding the prescribed information and when and how to reissue it. Failure to administer the deposit properly can invalidate your protection and result in penalties of up to three times the amount of the deposit.
Prior to the tenant taking occupancy, a deposit would have been taken from the tenant and should be registered with a tenancy deposit protection scheme.
When the tenant moves out of the property, the deposit should be returned to the tenant less any deductions that have been permitted: normally for damage (in excess of fair wear and tear), additional cleaning and to cover any outstanding rent. Any deductions relating to damage in the property or cleaning can only be made providing there is sufficient proof that the property was in better condition when the tenants first moved into the property. The only reliable way to provide this proof is using the inventory signed off at the start of the tenancy.