What is the Tenancy Deposit Scheme?

Since 2007, in England and Wales, all deposits taken by landlords for Short Assured Tenancies must be safeguarded by one of three Government approved ‘custodial’ or ‘insured’ schemes. Similar legislation was introduced in Scotland in March 2011, and will come into force over the upcoming months. Unlike in England and Wales, the protection scheme in Scotland will apply to all residential tenancies, not just Short Assured Tenancies under the Housing (Scotland) Act 1988. This means that the protection regime will also include lettings to companies. However, the scheme only applies to monetary deposits, so where a company offers (and the landlord accepts) a guarantee, the scheme will not apply. A further key difference in the Scottish regulations are that there is no provision for Insurance based Schemes; only Custodial Schemes will exist.

This legislation has a direct impact on how letting agents, landlords and property managers will need to operate.

How the schemes work

The principle behind the tenancy deposit regulations is to provide additional protection to tenants by ensuring that their deposits are registered by an impartial third party, who is able to offer free dispute resolution in cases where the tenant and landlord disagree about who should recieve the deposit at the end of the tenancy.

In Insurance based schemes (only available in England and Wales), the landlord or letting agency pays a fee to insure the deposit. They only need to physically transfer the deposit amount to the scheme in the event of a dispute. There is a cost to the landlord for every deposit taken.

In Custodial Schemes (available in Scotland as well as England and Wales), the deposit is physically transferred to the scheme. There is no cost associated with this; all the services provided by Custodial Schemes are free of charge. The scheme is then responsible for paying the deposit back to the landlord and the tenant directly. If the tenant and landlord claim different amounts, then the deposit enters the dispute resolution process.

Dispute resolution

The various schemes' dispute resolution processes are predicated upon the principle that the deposit defaults to the tenant. This key principle means that the burden of proof is on landlords and letting agencies; they must provide paper evidence to back up any claims they make on the deposit which are contested by the tenant.

The schemes put a high value on check-in and check-out inventories and regular inspection reports as relevant evidence, particularly if they contain high quality photographs, as these present the best record of the state of a property over the period of the tenancy.

How does this affect landlords, letting agents and property managers?

Without evidence, any claims made on a deposit which are contested by the tenant are likely to fail.

It is crucial for all letting agents, landlords, and property managers to not only create accurate, high quality inventory and inspection reports, but also to have an easily accessible archive of previous inspection and inventories, particularly in the case of long term lets. Performing the best inventories in the world doesn't help if you can't find them when you need to back up your claim!

How can Property Toolkit's Inspection and Inventory App help?

Property Toolkit's Inspection and Inventory iPhone app, and associated web system, has several key features which are uniquely capable of helping any property manager, letting agent, and landlord cope with the implications of the Tenancy Deposit Scheme:

Our Inspection and Inventory app will help you protect your claims on deposits.

Find out more

Why use the Inspection and Inventory App?

  • The most innovative way to create, manage and send inspection & inventory reports. Save time. Save money.
  • Create, manage and store complete property inspections without the need for pen and paper.
  • Includes photos of inventory items and any damage in need of repair.
  • Send high-quality reports direct to landlords.
  • Offer a better service to clients at less cost.
  • No training or special skill required.
  • Helps you handle a bigger portfolio with less staff
  • Find out more