THE newly-introduced tenancy deposit scheme is to affect both landlords and occupiers across the nation. Here, we look at the scheme in more detail.

What is the tenancy deposit scheme?

The scheme is a new system introduced last month which affects how tenancy deposits are held when properties are let on short-term tenancies. Deposits were paid at the start of a tenancy to the landlord, who kept it until the end of the tenancy when it was either returned or used to pay for repairs or cover unpaid rent. Under the new regulations, the deposit must be safeguarded under a custodial or an insurance scheme.

What is the custodial scheme?

The landlord must pay the deposit to a scheme operator. It is returned to the tenant at the end of the tenancy after notification to the scheme operator. If there is a dispute, the scheme operator keeps the amount until a judgement has been made. The scheme - www.depositprotection.com - is operated by The Deposit Protection Service and is free.

How does the insurance scheme work?

The landlord retains the deposit. The scheme assures it is returned to the tenant at the end of the tenancy. If there is a dispute, the landlord pays the disputed sum into the scheme. When the dispute is determined, any payment is returned to the tenant or the landlord. There are two separate insurance schemes - Tenancy Deposit Solutions at www.mydeposits.co.uk and The Tenancy Deposit Scheme at www.tds.gb.com

What if the landlord doesn't comply?

A tenant can take proceedings against a landlord which could result in the landlord paying compensation three times the amount of the deposit.

Are there any other requirements?

The deposit must be safeguarded within 14 days of receipt. The deposit should be returned to the tenant or the landlord in a custodial scheme within ten days following notification of agreement.