Any tenancy deposit paid to a person in connection with an assured shorthold tenancy must be dealt with in accordance with a scheme authorised by either the Secretary of State or the Welsh Assembly (Housing Act 2004, s.213). This provision means that all landlords and agents must ensure that deposits are safeguarded by a tenancy deposit scheme (TDS). Landlords, agents or tenants cannot avoid the legislation by agreeing that a deposit should not be safeguarded by a scheme. If a deposit is required the landlord or his agent must comply with the provisions. Within 30 days of the landlord or his agent receiving a deposit he must ensure that the deposit is safeguarded by an authorised TDS and give the tenant and, if relevant, the person who paid the deposit, prescribed information as to which scheme is safeguarding their deposit, how the scheme’s initial requirements have been met and details of the relevant legislation which protects their deposit. The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 provides that, inter alia, such information must include details as to repayment of a deposit and as to the procedure when there is a dispute about the amount to be paid or repaid.
A deposit cannot consist of property other than money (s.213(7)).
If a court finds that a landlord has failed to comply with these requirements it must order the landlord to pay to the tenant, within 14 days, a sum of up to three times the amount of the deposit, as well as either repaying the deposit or paying it in to an authorised custodial scheme (s.214).
At any time when a deposit is not being safeguarded in accordance with an authorised scheme, or certain requirements are not being met, the landlord cannot give a valid s.21 notice (see 41 Recovery of possession, above), and so cannot recover possession (s.215). The same applies at any time while a landlord is holding a deposit which cannot lawfully be required, i.e., one which consists of something other than money.
Further details about tenancy deposit schemes are contained in the Housing Act 2004, Schedule 10, as amended by the Housing (Tenancy Deposit Schemes) Order 2007.
In England and Wales it is possible to register a deposit with the following schemes authorised by the Department for Communities and Local Government–
(a) The Deposit Protection Service (The DPS) <www.depositprotection.com>;
(b) MyDeposits <www.mydeposits.co.uk>;
(c) The Tenancy Deposit Scheme (TDS) <www.tds.gb.com>.
The schemes offer a free dispute resolution service if there is a disagreement about how much deposit should be returned.
A tenancy deposit is a sum of money held as security for the performance of any of an occupant’s obligations arising under or in connection with a tenancy or an occupancy arrangement, or the discharge of any of their liabilities which so arise. A tenancy deposit scheme is a scheme for safeguarding such tenancy deposits paid in connection with the occupation of any living accommodation (Housing (Scotland) Act 2006, s.120).
The Scottish Ministers may approve a tenancy deposit scheme devised by them or by any other person but any approval must be given in accordance with the tenancy deposit regulations then in force (see 32 The Tenancy Deposit Schemes Regulations–Scotland, below). Before approving a tenancy deposit scheme, the Scottish Ministers must (s.122)–
(a) publicise the terms of the proposed scheme, and
(b) consult (i) such persons representing landlords or tenants whom they think may be affected by the proposed scheme, and (ii) such other persons as they think fit, about the proposed scheme.
The Scottish Ministers must review each approved tenancy deposit scheme from time to time and may, following any such review, take steps to secure the revision of the reviewed scheme, or withdraw their approval of it.
Safe Deposits Scotland <http://www.safedeposits scotland.com>, a not for profit organisation, is a tenancy deposit protection scheme approved by the Scottish Ministers under the Housing (Scotland) Act 2006. Also available is The Letting Protection Service Scotland (The LPS Scotland) <http://www.letting protectionscotland.com>, a government-approved custodial tenancy deposit protection scheme. Both schemes offer an independent alternative dispute resolution service.
The Scottish Ministers may approve different tenancy deposit schemes for different types of tenancy or occupancy arrangement, or more than one tenancy deposit scheme for the same type of tenancy or occupancy arrangement.
The Scottish Ministers may by regulations (“tenancy deposit regulations” (see 32 The Tenancy Deposit Schemes Regulations–Scotland, below)) set out conditions which a tenancy deposit scheme must meet before they can approve it, and make such further provision about tenancy deposit schemes as they think fit (s.121).
Tenancy deposit regulations may, in particular–
(a) make provision about the manner and circumstances in which tenancy deposits must be paid, held and repaid under an approved scheme;
(b) impose sanctions for failing to participate in, or to comply with, an approved scheme;
(c) set out a mechanism for resolving disputes relating to an approved scheme;
(d) prescribe the type of person who may administer an approved scheme,
(e) authorise the Scottish Ministers to make payments, or to give guarantees or other assistance, in connection with (i) the creation, administration or operation of an approved scheme, or (ii) the resolution of disputes relating to an approved scheme;
(f) set the amount, or the maximum amount, of any fee which may be charged in connection with an approved scheme; and
(g) prescribe arrangements for publicising approved schemes.
The Tenancy Deposit Schemes (Scotland) Regulations 2011 set out the conditions which tenancy deposit schemes must meet and establishes the regulatory framework for such schemes. A landlord who has received a tenancy deposit in connection with a relevant tenancy must, within 30 working days of the beginning of the tenancy (Reg. 3(1))–
(i) pay the deposit to the scheme administrator of an approved scheme;
(ii) provide the tenant with certain specified information.
The information that must be provided is (Reg. 42)–
(iii) confirmation of the amount of the tenancy deposit paid by the tenant and the date on which it was received by the landlord;
(iv) the date on which the tenancy deposit was paid to the scheme administrator;
(v) the address of the property to which the tenancy deposit relates;
(vi) a statement that the landlord is, or has applied to be, entered on the register maintained by the local authority under s.82 of the Antisocial Behaviour etc. (Scotland) Act 2004 (see Housing:Regulation of Landlords);
(vii) the name and contact details of the scheme administrator of the tenancy deposit scheme to which the tenancy deposit was paid; and
(viii) the circumstances in which all or part of the tenancy deposit may be retained at the end of the tenancy, with reference to the terms of the tenancy agreement.
The landlord must ensure that any tenancy deposit paid is held by the scheme from the date it is first paid until it is repaid in accordance with the Regulations following the end of the tenancy (Reg. 3(2)). A tenant who has paid a tenancy deposit may apply to the sheriff for an order where the landlord has not complied with any duty under Reg. 3 in respect of that deposit. An application must be made by summary application and must be made no later than three months after the tenancy has ended (Reg. 9). If satisfied that the landlord did not comply with the duty the sheriff must order the landlord to pay the tenant an amount not exceeding three times the amount of the tenancy deposit. The sheriff may, as he considers appropriate in the circumstances of the application, order the landlord to pay the tenancy deposit to an approved scheme or provide the tenant with the information required under Reg. 42 (Reg. 10).
The Regulations also set out the conditions which a scheme must meet before it can be approved. Inter alia, the person who acts as scheme administrator must be a fit and proper person to do so (Reg. 7). A scheme must be based on the following model (Reg. 11)–
(ix) no fee is payable by the landlord to the scheme administrator in respect of participation in, or otherwise in connection with, the scheme;
(x) the tenancy deposit is paid by the landlord to the scheme administrator;
(xi) the scheme administrator pays the tenancy deposit into an account maintained for the purpose of holding tenancy deposits;
(xii) the tenancy deposit is held in that account until it falls to be repaid in accordance with the Regulations.
A tenancy deposit scheme must be available to all landlords and their tenants and an appropriate customer service facility must be made available for handling enquiries in relation to the scheme and for dealing with complaints (Reg. 13). A scheme must operate on the basis of a business plan which ensures it is self-financing and supports the sustainability of the scheme (Reg. 14). Scheme procedures must protect deposits in the event of scheme failure (Reg. 15). The Regulations also sets out accounting requirements and make provision concerning designated accounts (Regs. 16 to 19).
A landlord must apply to the scheme administrator for repayment of any tenancy deposit paid to an approved scheme on, or as soon as is reasonably practicable after, the end of the tenancy. The tenant may apply for repayment of the deposit, but if an application for repayment has been made by the landlord, or is made within 30 working days of the tenant’s application, the scheme administrator must not progress the application (Reg. 24).
A dispute resolution mechanism must be made available free of charge for the landlord and tenant. It must not be compulsory, but the tenancy deposit scheme must require a landlord who has submitted a deposit to it to use the dispute resolution mechanism in any case where the tenant requests a referral (Regs. 33 to 39).
The scheme administrator has a duty to publicise approved schemes and to produce information leaflets before such schemes become operational (Regs. 40, 41).
The Enterprise and Regulatory Reform Act 2013 (ss.83 to 88) provides the Secretary of State with the power to require by order persons who engage in lettings agency work or in property management work in England to be members of a redress scheme for dealing with complaints in connection with that work which is either a redress scheme approved by the Secretary of State or a government administered redress scheme. A “redress scheme” is defined as a scheme which provides for complaints against members of the scheme to be investigated and determined by an independent person (2013 Act, s.83(2)). The Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014 is the order so made which requires persons who engage in such work to belong to a redress scheme (Arts. 3, 5).
The independent person referred to in s.83(2) is defined as the “Ombudsman”: Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013, Art. 2. There are three approved redress schemes–
The Property Ombudsman
<www.tpos.co.uk/index.htm>, Tel. 01722 333306.
Ombudsman Services – Property
<www.ombudsman-services.org/property.html>, Tel. 0330 4401634.
Property Redress Scheme
<www.theprs.co.uk/>, Tel. 0333 3219418.
“Lettings agency work” means things done by any person in the course of a business in response to instructions received from (Enterprise and Regulatory Reform Act 2013, s. 83(7))–
(a) a person seeking to find another person wishing to rent a dwelling-house in England under a domestic tenancy and, having found such a person, to grant such a tenancy (“a prospective landlord”);
(b) a person seeking to find a dwelling-house in England to rent under a domestic tenancy and, having found such a dwelling-house, to obtain such a tenancy of it (“a prospective tenant”).
“Lettings agency work” does not include any of the following things when done by a person who does no other things falling within (a) or (b) above (s.83(8))–
(c) publishing advertisements or disseminating information;
(d) providing a means by which (i) a prospective landlord or a prospective tenant can, in response to an advertisement or dissemination of information, make direct contact with a prospective tenant or (as the case may be) prospective landlord, (ii) a prospective landlord and a prospective tenant can continue to communicate directly with each other.
“Lettings agency work” does not include things done by a local authority (s.83(9)(a)).
“Property management work” means things done by any person (“A”) in the course of a business in response to instructions received from another person (“C”) where (s.84(6))–
(e) C wishes A to arrange services, repairs, maintenance, improvements or insurance or to deal with any other aspect of the management of premises in England on C’s behalf, and
(f) the premises consist of or include a dwelling-house let under a relevant tenancy.
However, “property management work” does not include things done by a person who is a social landlord for the purposes of Schedule 2 to the Housing Act 1996 (s.84(7)(a)).
Ss.83(9)(b) and 84(7)(b) provides that lettings agency work and property management work do not include things of a description or things done by a person of a description specified in an Order. Articles 4 and 6 of the Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014 prescribes those things that are not lettings agency work or property management work for these purposes. “Lettings agency work” does not include things done by (Art. 4)–
(g) the employer, where the prospective tenant is an employee;
(h) the person for whom the prospective tenant provides work or services, where the prospective tenant is a worker;
(i) the person for whom the prospective tenant provides work or services, where the prospective tenant is (i) an employee who provides work or services under the contract of employment to a person who is not the prospective tenant’s employer; or (ii) a worker who provides work or services under the worker’s contract to a person who is not a party to that contract;
(j) the hirer, where the prospective tenant is an agency worker;
(k) the person for whom the prospective tenant provides services under a contract for services;
(l) an institution within the meaning of paragraph 5 of Schedule 1 to the Local Government Finance Act 1992 (educational establishments);
(m) an authorised person within the meaning of s.18 of the Legal Services Act 2007 (i.e. a person authorised by an approved regulator to carry on a legal activity).
“Property management work” does not include things done in relation to premises which consist of or include more than one dwelling-house where the land is registered as commonhold land or premises which are used wholly or mainly for the accommodation of students in halls of residence where certain conditions are satisfied. “Property management work” also does not include things done in relation to premises which are not operated on a commercial basis and the costs of operation are provided wholly or in part by a government department or agency, by a local authority or by a parish council or it is managed by a voluntary organisation or charity and the premises are used for providing accommodation to persons who have been subject to violence, abuse or threatening behaviour. Things done by certain receivers or mortgage companies are also excluded (Art. 6).
Where an enforcement authority (i.e. local authority) is satisfied on the balance of probabilities that a person has failed to comply with the requirement to belong to a redress scheme the authority may by notice require the person to pay a monetary penalty not exceeding £5,000 (Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014, Art. 8). Where an enforcement authority proposes to impose a monetary penalty on a person it must first serve a notice of what is proposed (a “notice of intent”) within six months of the date on which the enforcement authority is first satisfied that the person has failed to comply with the requirement. The person may then make written representations and objections within 28 days of the notice after which time the enforcement authority must decide whether to impose a monetary penalty and, if it does, serve a final notice (2014 Order, Sch. 1). A person who is served with a final notice may appeal to the First-tier Tribunal against that notice and the grounds for appeal are that (Art. 9)–
(a) the decision to impose a monetary penalty was based on an error of fact;
(b) the decision was wrong in law;
(c) the amount of the monetary penalty is unreasonable;
(d) the decision was unreasonable for any other reason.
The Tribunal may quash, confirm or vary the final notice.
The Department for Communities and Local Government has produced a policy paper published in January 2014 which sets out instructions for redress schemes covering lettings agency work and property management work seeking government approval. The document is an introductory note that explains how the schemes can apply to be an approved scheme. The accompanying annex to the introductory notes provides the detailed conditions that must be satisfied before the Secretary of State approves a redress scheme. Both documents are available at <www.gov.uk/government/publications/the-redress-schemes-conditions-for-approval>.
The Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013 sets out the procedure that applies where an application for approval is made and the conditions that must be satisfied before the Secretary of State may approve a redress scheme or designate a scheme as a government administered redress scheme. The procedure that applies where the Secretary of State decides to withdraw the approval of a redress scheme or revoke the designation of a government administered redress scheme is also dealt with by this Order.
In order to avoid a penalty, a landlord or agent must establish a tenant’s right to rent by obtaining, verifying and retaining copies of prescribed documents, as set out in the Immigration (Residential Accommodation) (Prescribed Requirements and Codes of Practice) Order 2014.
The landlord or agent must obtain from the occupier or prospective occupier –
(a) one document listed in List A in the Schedule to the Order; or
(b) two documents listed in List B in the Schedule; or
(c) a Positive Right to Rent Notice in respect of the occupier or prospective occupier from the Home Office Landlord Checking Service (where the occupier or prospective occupier has an immigration or asylum application or appeal which has yet to be determined).
Note.–If the Landlord Checking Service does not respond within two working days, then the landlord or agent may proceed as though the Landlord Checking Service had issued a Positive Right to Rent Notice.
The documents in List A are–
1. a passport showing that the holder is a British citizen or a citizen of the United Kingdom and Colonies having the right of abode in the UK;
2. a passport or national identity card showing that the holder is a national of an EEA state or Switzerland;
3. a passport or travel document which has not expired endorsed to show that the holder is allowed to stay in the UK for a time limited period;
4. a registration certificate issued by the Home Office to a national of an EEA state or Switzerland under the Immigration (European Economic Area) Regulations 2006, Reg. 16;
5. a document certifying permanent residence issued by the Home Office to a national of an EEA state or Switzerland under the Immigration (European Economic Area) Regulations 2006, Reg. 18;
6. a permanent residence card issued by the Home Office to the family member of a national of an EEA state or Switzerland under the Immigration (European Economic Area) Regulations 2006, Reg. 18;
7. a residence card or derivative residence card which has not expired or been revoked;
8. a biometric immigration document which has not expired issued by the Home Office to the holder which indicates that the person named in it is allowed to stay indefinitely in the UK or has no time limit on their stay in the UK;
9. a biometric immigration document which has not expired issued by the Home Office to the holder which indicates that the person named is permitted to stay in the UK for a time limited period;
10. a passport or other travel document endorsed to show that the holder is exempt from immigration control, is UK Kingdom, has the right of abode in the UK, or has no time limit on their stay in the UK;
11. an immigration status document which has not expired containing a photograph issued by the Home Office to the holder with an endorsement indicating that the person named in it is allowed to stay in the UK indefinitely or has no time limit on their stay in the UK;
12. a certificate of registration or naturalisation as a British citizen.
The documents in List B are–
1. a full birth certificate issued in the UK which includes the name of at least one of the holder’s parents;
2. a full adoption certificate issued in the UK which includes the name of at least one of the holder’s adoptive parents;
3. a birth certificate issued in the Channel Islands, the Isle of Man or Ireland;
4. an adoption certificate issued in the Channel Islands, the Isle of Man or Ireland;
5. a letter issued by a government department or local authority no longer than 3 months before the date on which it is presented, confirming the holder’s name and the earliest known contact between that government department or local authority and the holder and signed by a named official stating their name and professional address;
6. a letter, issued no longer than 3 months before the date on which it is presented, confirming the holder’s name and signed by a British passport holder, stating how long the British passport holder has known the holder, the relationship between them, and giving the British passport holder’s name, address and passport number;
7. a letter issued by a person who employs the holder issued no longer than 3 months before the date on which it is presented, which indicates the holder’s name and confirming their status as an employee and employee reference number and states the employer’s name and business address;
8. a letter issued by a police force in the UK no longer than 3 months before the date on which it is presented, confirming that the holder has been the victim of a crime and personal documents have been stolen, and stating the crime reference number;
9. a document issued by one of Her Majesty’s forces or the Secretary of State confirming that the holder is or has been a serving member of that force;
10. an identity card issued by any of Her Majesty’s forces;
11. a letter issued by Her Majesty’s Prison Service, the Scottish Prison Service or the Northern Ireland Prison Service confirming that holder has been released from the custody of that service and confirming their name and date of birth;
12. a letter issued within 6 months of discharge by an officer of the National Offender Management Service in England and Wales, an officer of a local authority in Scotland who is a responsible officer for the purposes of the Criminal Procedure (Scotland) Act 1995 or an officer of the Probation Board for Northern Ireland confirming the holder’s name and date of birth;
13. a current licence to drive a motor vehicle granted under Part 3 of the Road Traffic Act 1988(11) (to include the photocard licence in respect of licences issued on or after 1st July 1998) or Part 2 of the Road Traffic (Northern Ireland) Order 1981 (to include the photocard licence);
14. a current firearm or shot gun certificate granted by a chief officer of police under the Firearms Act 1968, Part II, a firearm certificate issued by the Chief Constable under the Firearms (Northern Ireland) Order 2004, Art. 5; or a current authority issued by the Secretary of State or Scottish Ministers under the Firearms Act 1968, s.5 or the Secretary of State under the Firearms (Northern Ireland) Order 2004, Art. 45;
15. a certificate issued no longer than 3 months before the date on which it is presented, by the Disclosure and Barring Service under Part V of the Police Act 1997, the Scottish Ministers under Part 2 of the Protection of Vulnerable Groups (Scotland) Act 2007; or the Secretary of State under Part V of the Police Act 1997 in relation to the holder;
16. a document issued no longer than 3 months before the date on which it is presented, by Her Majesty’s Revenue and Customs, the Department of Work and Pensions, the Northern Ireland Department for Social Development or a local authority confirming that the holder is in receipt of a benefit listed in the Immigration and Asylum Act 1999, s.115(1) or (2).
Checks made by landlords only establish an excuse if they are conducted within 28 days before the date on which the tenancy agreement is entered into (At. 8).
Where a tenancy arrangement is agreed in principle with a tenant who is at that time outside the UK e.g., with an overseas student or business person who needs to arrange their UK accommodation in advance, then the tenancy agreement will be considered to have been “entered into” on the date that the tenant is entitled to take possession of the premises. In such cases, a landlord should conduct the prescribed checks after the tenant has arrived into the UK and before providing possession of the premises (Immigration (Residential Accommodation) (Prescribed Cases) Order 2014, Art. 4).