Tenancy deposit protection will become mandatory in Northern Ireland from the beginning of April and landlords are being reminded that they will need to abide by the law. All landlords will be required by law to use one of the available schemes to protect all deposits they receive for private tenancies.
They can either transfer the deposits to a custodial scheme for free or they may retain them for a fee through the insurance scheme. The Letting Protection Service Northern Ireland, MyDeposits which was launched by the National Landlords Association, and The Tenancy Deposit Scheme, originally launched by Association of Residential Lettings Agents, have all won approval and will all be offering both custodial and insured options.
All three bodies also run schemes in Scotland although in Scotland only custodial schemes are allowed. There are two types of schemes which have been approved to operate in Northern Ireland, the custodial scheme and the Insurance scheme.
The Custodial scheme, which is free for both the landlord and tenant to use, is where all the deposit is handed over by the landlord to the scheme administrator for safe keeping in a designated account. The tenant or the landlord can apply at the end of the tenancy for repayment of the deposit although in the event of a dispute the scheme administrator will hold on to the disputed amount until the issue is resolved.
The insurance scheme is where the landlord holds on to the deposit and pays a fee and any contribution towards insurance to the scheme administrator. The landlord refunds the deposit to the tenant when it is due to be refunded. In the case where there is a dispute, the landlord hands over to the scheme administrator the disputed amount to safeguard until the dispute is resolved.
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The benefits include the fact that deposits will be protected by an independent third party and prevent the deposit from being unfairly withheld by landlords or letting agents at the end of the tenancy. The new rules will also facilitate the quick repayment of deposits and where a landlord and tenant agree about the return of the deposit the funds must be returned within five working days.
They also allow tenants and landlords access to an independent dispute resolution service as every approved scheme will provide a free service to resolve disagreements over the return of deposits – as an alternative to taking legal action through the courts. Under the rules landlords must give the tenant key information about the tenancy, the deposit and the scheme that safeguards the deposit. Schemes will also provide information about the protection of deposits and their services to tenants and landlords.
A tenant can report a landlord to the local council if they fail to submit deposits to an approved scheme and/or provide information to the tenant within the specified time limits. Councils will have the power to issue fixed penalties in these cases. Overall the industry says that it will bring more professionalism to the private rented sector as the introduction of tenancy deposit schemes will raise standards in relation to management of deposits.
‘Tenancy Deposit Protection is an important step forward for the private rented sector in Northern Ireland, according to the Dispute Service’s chief executive Steve Harriott. ‘Tenants will have peace of mind that their deposits are securely protected and both landlord and tenant will have the reassurance that any disputes over their return, can be resolved fairly without having to go to court,’ he explained.
‘The new schemes will also benefit those honest agents and landlords who make up the vast majority of the sector but have their reputation undermined by those who treat tenants unfairly,’ he added.