Buy-to-let (BTL) lender Paragon Mortgages warned that landlords could face large fines if they ended up in a dispute over deposits without TDP. The scheme was introduced six months ago when it became law for landlords taking assured shorthold tenancies to take out one of three TDP schemes.
Landlords have a choice of three schemes – the Deposit Protection Service, which holds the deposit directly and returns the interest to tenants when they leave, or Tenancy Deposit Solutions and the Tenancy Deposit Scheme which are insurance-based and allow the landlord to retain deposits, but the landlord must pay a premium to the insurer.
Paragon warned any landlord who was holding deposits for tenancies outside a scheme would forfeit their normal right to possession and could also be fined up to three times the value of the original deposit in the event of a dispute with a tenant.
John Heron, managing director of Paragon Mortgages, said: “As ASTs taken out after 6 April start to expire, we could see a number of cases going to Alternative Dispute Resolution. Without the protection of a scheme, landlords are leaving themselves open. It doesn’t make business sense and it could also mean that the landlord is breaking the law.”
The National Landlords Association has estimated that three quarters of landlords have yet to register with a scheme. Head of public affairs Simon Gordon, said: “I can’t reiterate how much landlords should protect the deposit with one of the schemes or they will have problems.”
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