There are currently three schemes which the Government has given approval to in relation to tenancy deposit protection, since it became a legal obligation in 2007:
- The Deposit Protection Service (DPS)
- The Tenancy Deposit Scheme (TDS); and
TDS & mydeposits are primarily insurance-backed themes which allow landlords or their agents to keep hold of deposits themselves in exchange for an insurance fee. DPS is primarily a custodial scheme, which means that it is free and takes receipt of the funds.
There are pros & cons to both schemes and landlords & agents have their preferences. The custodial scheme is traditionally perceived as being safe because they hold the deposits, whilst the insurance-backed scheme is seen as quicker in releasing tenants’ funds as they are already in the landlord or agent’s possession. It’s fair to say that as a result of both schemes becoming industry standard, tenancy deposit protection has improved significantly.
Continuous changes have been happening to all three schemes over the last few months and we have summarised these below:
A. The Deposit Protection Service (DPS)
The DPS announced in November 2015 that it had renewed it’s contract with the Government to run an authorised tenancy deposit protection scheme. Since tenancy deposit protection became law in 2007, the DPS has been providing the only custodial scheme in England & Wales, but that is all due to change with the TDS and mydeposits introducing custodial schemes this coming April.
The DPS also has an insurance-backed scheme, which is significantly lower subscribed, holding around 25,000 deposits compared with the 1.26 million deposits held in the custodial scheme.
B. The Tenancy Deposit Scheme (TDS)
The TDS was originally set up by the Association of Residential Letting Agents (ARLA) and has the support of the Royal Institute of Chartered Surveyors (RICS) and the Residential Landlord Association (RLA).
In November 2015, TDS announces that it had been granted Government approval to launch a custodial protection scheme alongside its existing insurance-backed product. Landlords and agents will be able to use one or both products as well as having the ability to switch between them mid-tenancy.
This scheme was launched by the National Landlords Association (NLA) in partnership with insurance firm Hamilton Fraser. mydesposits also announced in November 2015 that it was launching a custodial deposit protections scheme in April 2016.
In addition, mydesposits announced in July last year that it was allowing letting agents to join the scheme online to reduce paperwork as well as the time spent on the set-up process, thereby allowing agents to protect deposits almost instantly.
From April 2016, all three schemes will offer a mixture of custodial and insurance-backed schemes, thereby giving landlords and agents the widest possible choice when it comes to deposit protection.
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