The Housing Amendment Act 2011 introduced a legal requirement for any deposits taken as part of a residential tenancy to be registered with a tenancy deposit protection scheme. Any deposits taken on or after 1 April 2013 will have to be protected in an authorised and approved Tenancy Deposit Scheme. You'll be able to choose whether to use an insurance-based scheme or a custodial scheme.
Deposits must be protected in an authorised scheme managed by an approved scheme administrator. The Department for Communities is responsible for appointing scheme administrators. There are 3 approved administrators operating in Northern Ireland. They are:
- My Deposits
- Tenancy Deposit Scheme Northern Ireland (TDS NI)
- Letting Protection Service Northern Ireland (LPS NI)
Companies can offer either an insurance based scheme or a custodial scheme and may choose to provide both types of scheme. No other companies are authorised to protect deposits in Northern Ireland. If you place your deposit with a company other than these three you are not meeting the legal requirements and will face a fixed penalty or prosecution.
Landlords will have to protect their tenants' deposits with one of the 3 approved companies authorised to provide a tenancy deposit protection service. This will have to be done within 14 days of receiving the deposit. In addition, you will have to supply the company with the following information within 14 days of taking the deposit
- the amount of the deposit and the address of the tenancy
- your full name and date of birth
- your contact details, including your registered address, telephone number, mobile number and an email address
- your correspondence address, which must be in Northern Ireland, if it differs from the address above,
- confirmation of the tenant's contact details and details of anyone acting on the tenant's behalf.
You must supply tenants with certain information within 28 days of receiving the deposit
Within 28 days of receiving the deposit you will need to give your tenants the following information
- details of the amount of the deposit and the address of the tenancy
- your name and contact details including your registered address, telephone number, mobile number and an email address
- the contact details of any agent acting on your behalf
- a correspondence address for you, which must be in Northern Ireland, if it differs from the registered address supplied
- confirmation of the tenant's contact details
- details of the scheme with which the deposit has been placed
- details of how the deposit will be refunded at the end of the tenancy and
- information on what will happen if the tenant is not contactable at the end of the tenancy.
Failing to protect the deposit in an authorised scheme or failing to provide any of this information within the required timeframes will result in a fixed penalty or prosecution.
If you use an insurance scheme you will be able to hold on to the deposit but you'll have to pay a fee to the company who is protecting the deposit. At the end of the tenancy you will give the tenant the deposit less any deductions for damages or rent owing. If the tenant disputes these deductions you will have to hand over any disputed amount to the company protecting the deposit to look after until the dispute has been resolved.
Using a custodial scheme means you'll give the whole deposit to the company to protect until the tenancy ends. There is no charge for this scheme. At the end of the tenancy either you or the tenant can apply to the scheme for the return of the deposit. If there is a dispute the company will hold on to any disputed amount until the dispute has been resolved.
The scheme administrator will provide a dispute resolution service. This service must be free to both you and your tenant. If a tenant opts to use this scheme to resolve any disputes about the deposit, you'll have to agree to abide by the scheme adjudicator's decision.
Only deposits which are handed over on or after 1 April 2013 must be protected. If an existing tenant had paid a deposit on 1 April 2012 then signed a new agreement on 1 April 2013 the deposit would not have to be protected in an authorised scheme. The requirement applies to the date that money for a deposit is actually handed over. However, there is a legal argument that a new tenancy is created each time a tenancy renews. In light of this argument, it's advisable to protect the tenant's deposit if a tenancy becomes periodic after 1 April 2013.
Deposits taken in instalments
Some landlords will allow their tenants to pay off their deposit in a number of instalments. If you agree to do this you still have to protect the full amount of the deposit within the required timeframe. Talk to the 3 approved scheme administrators to find out if they have systems in place to help landlords who don't require the deposit in full at the start of the tenancy.
Penalties for non compliance
Your local council can take legal action against you if you fail to either
- protect the tenancy with a registered scheme and supply the required information to the scheme administrator within 14 days of receiving the deposit or
- supply the tenants with the required information within 28 days of receiving the deposit,
The council can prosecute you for this offence and, on conviction, you could be fined up to £20,000. You will also be given the opportunity to avoid a court hearing by paying a fixed penalty. The fixed penalty will be equal to three times the deposit you took for the property.