A very good evening to you all! As I was reading through the replies to my question in 'Bankruptcy/closure of letting agency', I realised how little I know about this fairly new Tenancy Deposit Scheme. Would any of you more experienced and informed members kindly explain how it works and what landlords need to do to put this scheme in place?

Morning all! I'm afraid I'm not experienced at all in this matter. However, this is something I would be really interested to know more about. I am thinking of letting my house in the near future through the agents. As such, it would be useful to know what they are supposed to do with the deposit and how one can check that regulations have been followed.

Yes, I definitely need to know how it works. Did this scheme come into force only a year ago or so! I am guessing here, but letting agents would probably deal with deposits on behalf of the landlord. But what one should do if there are no agents involved!

This particular regulation did come into force in April 2007. It gives landlords two options to deal with tenants deposits. One of them is called custodial scheme. Here, all deposits are held centrally (in custody of government approved body). Landlords must register details of their new tenancy and transfer the deposit to Computershare Investor Services Plc. No fees are charged, it’s an interest accrued on deposits that pay for the running of this scheme. At the end of the tenancy if there is no dispute, deposit is returned to the tenants or shared between landlords and tenant as agreed. In case of any dispute, it is held until such dispute is resolved. There is also an insurance premium scheme, but I am not quite sure how it’s run and who actually holds the deposit money.

Yeah, following the Housing Act 2004, the scheme mentioned above was introduced in 2007 to protect tenants deposits. The option described by ivolets is probably more suitable for those who do not have many deposits to handle. Another plus is that there is no fee. On the other hand, if you are a landlord or letting agent with lots of properties, you may wish to have control over your tenants deposits. If this is the case, insurance backed scheme is probably a better option. Here, you keep the deposit but pay a premium to the government approved insurer. At the end of the tenancy, should there be any issue over the deposit (how it is to be returned, divided, etc), deposit in question will have to be transferred until the issue is resolved.

What I love about this scheme (i'm really sad aren't i) from the tenants point of view is that should the letting agency flops or landlord goes bust, deposit should be safe! It's good news for landlords whose properties are managed by letting agents too, you know!

Hello! It's also important to notify your tenants about the deposit scheme within the 14 days from taking the deposit. In respect of the insurance backed scheme, at the moment there are two government approved bodies: the dispute service ltd (tds) and the national landlords association (nla) whose insurance scheme is operated by hamilton fraser insurance. They say that tds scheme is more suitable for letting agents, while nla scheme is preferred by landlords. There is a fee, of course, for each one of them.

Wow its superb and great scheme.