The Tenancy Deposit Scheme

An update on the legislation

Under the Housing Act 2004, the Government introduced measures to protect rent deposits taken in connection with residential Assured Shorthold Tenancies ("ASTs"). These rules have applied since 6 April 2007, although there have been a number of amendments to the original legislation.

The scheme was designed to have two main purposes:

1. to safeguard tenancy deposits paid in connection with ASTs; and
2. to assist in resolving disputes arising between landlords and tenants in connection with such deposits.

There are two types of TDS: custodial and insurance-based.

Custodial Schemes

Under custodial schemes, the tenant pays a deposit to either the landlord or agent who pays the deposit into a "designated scheme account". The scheme safeguards the deposit by holding it until such time as both parties agree on the terms of release and in what proportion, or following the notification of the outcome from dispute resolution.