At the six-month anniversary of mandatory TDP, Paragon has warned that landlords could face large fines if they end up in a dispute over deposits without the protection of a scheme.
It became law for landlords taking assured shorthold tenancy (AST) deposits to be a member of one of three TDP schemes on 6 April. Any landlord holding deposits for ASTs outside a scheme after that date 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.
The six month anniversary of the scheme’s introduction could see an increase in the number of cases going to resolution as ASTs are arranged for an initial six-month period and the first batch issued after 6 April set to expire. The National Landlords Association (NLA) has estimated that three quarters of landlords have yet to register with a scheme.
John Heron, managing director of Paragon Mortgages, advised: "Most landlords have embraced the new rules and are already happily working with them. But those landlords that haven’t joined a scheme could find that they are unable to evict tenants if they have caused damage to a property or that they could pay out three times the deposit back if they end up in a dispute.
"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."
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. Both are insurance-based and allow the landlord to retain deposits, but they must pay a premium to the insurer.
Paragon’s research reveals that the Tenancy Deposit Scheme is the most popular option with its customers, with 37% becoming members of the scheme, followed by the Deposit Protection Service and Tenancy Deposit Solutions.
And those landlords appear to be getting to grips with the new laws. Less than half (48 per cent) said that the introduction of tenancy deposit schemes had made business more difficult for them, down from 58 per cent in May.
Heron concluded: "Landlords that let out their property through a lettings agent should check whether they are covered through their agent, but those that rented their property privately with an AST and a deposit after 6 April will need to make sure they are a member of a scheme.
"There aren’t any other options really. Landlords dispensing with an AST, not taking deposits or taking deposits and not protecting them are taking risks and could leave themselves out of pocket."
