What types of tenancy deposit schemes are available?
There are at present two types of tenancy deposit protection schemes available for landlords:-
1. The custodial scheme
The landlord pays the deposit to the scheme administrator to hold for the duration of the tenancy. This scheme is likely to be used most by individual private landlords who do not use letting or managing agents. It is free to landlords and tenants and covers its costs by earning interest on the deposits held.
2. The insurance schemes
The landlord or letting agent may hold the deposit, but must pay to join an insurance-based scheme, which provides cover for the return of the deposit to the tenant if the landlord or agent should fail to do so without good cause. Understandably, therefore, the scheme administrators require certain professional standards of members, making these schemes more suitable for letting agents and large-scale professional landlords.
There are two insurance-based schemes:
One, aimed at landlords, is run by Tenancy Deposit Solutions Ltd (www.mydeposits.co.uk), telephone 0871 703 0552, sponsored by the National Landlords Association.
The second, aimed at letting agents, is run by The Dispute Service Ltd (www.tds.gb.com), telephone 0845 226 7837, sponsored by the industry professional bodies ARLA, NAEA and RICS.