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Deposit protection required under AST rules

Nia Williams

September 22, 2010

The AST threshold will increase to include all tenancies with annual rent up to £100,000 – up from the current £25,000.

The increase will give tenants paying higher rent the benefit of Tenancy Deposit Protection (TDP), while landlords will be able to use “off-the-shelf” tenancy agreements.

Landlords who have taken a deposit for a property after 6 April 2007 with annual rent up to £100,000 are advised to protect the deposit with one of three government-approved tenancy deposit schemes.

Deposits taken before 6 April 2007 do not have to be protected unless the tenancy agreement has been renewed. Letting agents will also need to notify their clients of the need to protect deposits.

Landlords who fail to protect a deposit taken after this date will not be able to serve a Section 21 notice on a tenant to begin possession proceedings when the property becomes an AST. They may also be ordered to pay the tenant three times the deposit amount as a penalty.

Disputes over the return of a deposit can be heard and determined by the TDP scheme where it is protected, instead of through the county court.

Eddie Hooker, chief executive, mydeposits.co.uk, said: “The threshold increase is excellent news for tenants paying higher rents, who will now have the security of knowing their deposit must be protected.

“Landlords and tenants will benefit from faster dispute resolution services, so if there is an argument over the return of the deposit it can be sorted out by the tenancy deposit scheme rather than through a lengthy court procedure.

“Landlords with existing common law tenancies who took a deposit before April 2007 won’t be required to protect it until a new tenancy agreement is issued. However, because of some uncertainties surrounding the legislation we recommend they do so to prevent potential costly penalties.”


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