The Tenancy Deposit Scheme comes into force on 6th April, establishing new rules for the management of deposits paid on Assured Shorthold Tenancies. Annabel Armstrong, Lettings Manager of National Property Specialists Strutt & Parker, advises on the implications of the Scheme for residential property owners.

‘The good news is that the new rules introduced under the Housing Act 2004 will allow end-of-tenancy claims to be resolved more quickly and cost effectively,’ she says. ‘But they mean that landlords need to rethink the way they hold the tenancy deposits, ingoing and outgoing property checks and the renewal of tenancy agreements and the details that they contain.

‘A noticeable effect will be more paperwork: within 14 days of the commencement of the tenancy, the landlord must supply the tenant with details of the scheme and information on how the deposit is to be handled during the tenancy. In order to avoid disputes, or promptly resolve any that arise, it is essential (although not as yet mandatory) to make detailed inventories and records of condition at the beginning of a tenancy, and sensible to conduct regular property checks during it, and keep details of any issues raised with the tenant as a result of those checks.

‘This could mean higher costs for setting up new tenancies especially for those who have not previously commissioned records of condition and inventories. Strutt & Parker recommends that landlords implement these pre and post tenancy checks as a matter of course, but they will become more important when the new Scheme comes into force as without these the adjudicators of disputes are more likely to decide in a tenant’s favour.

‘The Tenancy Deposit Scheme may have some wider effects, particularly for those landlords used to holding deposits in their current accounts. The Scheme will see the gradual removal of deposit cash from accounts as properties are re-let or fixed term renewals are documented post 5th April when deposits will either have to be transferred to the Government backed Custodial Scheme or by an Agent or Landlord registered with one of the two approved Insurance backed schemes.

On a practical level, landlords must ensure that their properties are checked promptly at the end of a tenancy, otherwise they will lose control of the deposit: it must be returned to the tenant in full or with agreed deductions within 10 days or be passed to an Independent Case Examiner.

‘These effects may seem inconvenient now and will require a revision of landlord’s paperwork and procedures but they will be balanced by fast resolutions of disagreements and less cause for antagonism between landlord and tenant. I am confident that after a bedding-in period the Scheme will work to everyone’s advantage.’