In the past tenants were require to hand over a deposit to a private landlord. However unscrupulous landlords often refused to pay back this deposit. The standard deposit can vary between £600 and upto £2000 in London.
On 6 April, the Government will introduce the Tenancy Deposit Protection (TDP) scheme takes effect in England and Wales. Landlords will now be held accountable for any proportion they hold back at the end of the renting term.
Landlords will have 2 choices
1. Insurance based scheme. under this choice the landlord can still hold the deposit but if there is a dispute at the end of the mortgage term the landlord and tenants can make use of the Alternative Dispute Resolution (ADR) – The ADR will listen to both sides of the argument and try to arbitrate fairly.
2. Custodial Scheme. Here all deposits are held by a government agency. Tenants will also earn interest at 2.32% below the base rate. If there is a dispute the landlord and tenants can use a different free arbitration service run by the Chartered Institute of Arbitrators – to decide how much of the deposit needs to be returned
Landlords who do not comply with the new rules may lose the right to evict tenants.
These new rules do not apply to lodgers. i.e. where the tenant lives in the same house as the owner. They also exclude university approved digs and some commercial rents.