Wednesday, 31 October 2012
Tenancy Deposit Schemes
What is a tenancy deposit?
A tenancy deposit is a sum of money which a landlord may ask a tenant to pay at the start of a tenancy. The landlord holds the money or security ahainst the tenant not meeting their obligations in connnection with the tenancy agreement. The tenancy agreement should set out the circumstances in which the deposit may be withheld by the landlord at the end of the tenancy.
What is a tenancy deposit scheme?
A tenancy deposit scheme is an independent third party scheme which has been approved by the Department for Social Development (DSD) to hold and protect tenants' deposits until they need to be repaid at the end of the tenancy.
Why is the Tenancy Deposit Schemes legislation being introduced?
There are many benefits to both the landlord and the tenant with the introduction of the tenancy deposit schemes legislation such as:
(1) Tenancy deposits will be protected by an independent third party. This will prevent deposits being unfairly withheld by landlords or letting agents at the end of the tenancy.
(2) Quick repayment of deposits. Where a landlord and tenant agree about the return of the deposit it must be returned within 5 working days.
(3) Free access to an independent dispute resolution service. Every approved scheme will provide a free service to resolve disagreements over the return of deposits as an alternative to taking legal action through the courts.
(4) Provision of information. Landlords must give the tenant key information about the tenancy, the deposit and the scheme that safeguards the deposit. Schemes will also provide information about the protection of deposits and their services to tenants and landlords.
(5) Sanctions for non-compliance. A tenant can report a landlord to the local council if he fails to submit the deposit to an approved scheme and/or provide information to the tenant within the specified time linit. Councils will have the power to issue fixed penalties in these cases.
(6) Improved professionalism of the private rented sector. The introduction of tenancy deposit schemes will raise standards in relation to management of deposits.
What are the different types of schemes?
There will be two types of schemes allowed to operate in Northern Ireland, the custodial scheme and the insurance scheme.
The custodial scheme, which is free for both the landlord and tenant to use, is where all the deposit is handed over by the landlord to the scheme administrator for safe keeping in a designated account and either the tenant or the landlord can apply at the end of the tenancy for repayment of the deposit. In the event of a dispute the scheme administrator will hold on to the disputed amount until the dispute is resolved.
The insurance scheme is where the landlord holds on to the deposit and pays a fee and any contribution towards insurance to the scheme administrator. The landlord refunds the deposit to the tenant when it is due to be refunded. In the case where there is a dispute, the landlord hands over to the scheme administrator the disputed amount to safeguard until the dispute is resolved.
When will the teancy deposit schemes be available?
Once a scheme administrator(s) has been approved by DSD and the necessary publicity of their approved scheme has taken place, it is anticipated that the tenancy deposit schemes will become operational and that the first deposits should start to be protected in early 2013.
The introduction of tenancy deposit schemes in Northern Ireland is part of a wider series of measures, including landlord registration, which are intended to make the private rented sector a better option for someone seeking a house.
Posted by Nelson McCausland MLA at 08:24