Tenancy Deposit Schemes
Tenancy Deposit Schemes
The Tenancy Deposit Schemes Regulations (Northern Ireland) Order 2012 were approved by the Assembly in September last year and came into operation on 1 November 2012.
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 tenant’s deposits until the end of the tenancy.
Why has the tenancy deposit schemes legislation been introduced?
There are many benefits to both the landlord and the tenant with the introduction of the tenancy deposit schemes such as:
- Tenancy deposits are protected by an independent third party. This prevents deposits from being unfairly withheld by landlords or letting agents at the end of the tenancy.
- Quick repayment of deposits. Where a landlord and tenant agree about the return of the deposit the deposit must be returned within 5 working days.
- Free access to an independent dispute resolution service.Every approved scheme provides a free service to resolve disagreements over the return of deposits as an alternative to taking legal action through the courts.
- Provision of information. Landlords must give the tenant key information about the tenancy, the deposit and the scheme that safeguards the deposit. Schemes also provide information about the protection of deposits and their services to tenants and landlords.
- Sanctions for non compliance. A tenant can report a landlord to the local council if the landlord fails to submit deposits to an approved scheme and/or provide information to the tenant within the specified time limits. Councils will have the power to issue fixed penalties in these cases.
- 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 are 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/or a 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 do the tenancy deposit schemes become operational?
Tenancy deposits schemes will be operational as and from the 1 April 2013 and any deposit taken on or after that date must be protected in an approved scheme. Scheme administrator(s) have been appointed by the Department to operate approved schemes. They are:-