Tenancy Deposit Protection (TDP) will add to the measures already brought in to drive up standards in the private rented sector set out in Housing Act 2004. Those measures include licensing multiple occupancy homes and new safety rules.

TDP will apply to all assured shorthold tenancies (ASTs) in England and Wales, where a deposit is taken. Virtually all new contracts to let a property are ASTs.

Tenancy Deposit Protection startedon 6 April 2007, and is valid for all new tenancy agreements from this date.

There are two main aims:

1. To ensure good practice in deposit handling, so that when a tenant pays a deposit, and is entitled to get it back, they can be assured that this will happen.

2. To assist with the resolution of disputes by having an alternative dispute resolution service (ADR). It will also encourage tenants and landlords to have in place, from the outset, a clear agreement on the condition of the property through best practice, such as the use of inventories, and agreement on the condition of the property.

TDP in summary:

•  Landlords will be required to join a statutory tenancy deposit scheme, if they take deposits

•  This will mean that deposits are safeguarded

•  Tenants will get all or part of their deposit back, if they have kept the property in good condition and are entitled to get their deposit back.

•  The scheme offers alternative ways of resolving disputes which aims to be faster and cheaper than taking court action.

What is Tenancy Deposit Protection?

From 6 April 2007, all deposits taken by landlords for what is called Assured Shorthold Tenancies - the vast majority of tenancies - in England and Wales must be protected by a tenancy deposit protection scheme.

To avoid disputes going to court, each scheme will be supported by an alternative dispute resolution service (ADR), whose aim is to make disputes faster and cheaper to resolve.

How does TDP work?

Landlords will be able to choose between two types of scheme: a single custodial scheme and one or more insurance-based schemes.

Insurance-based schemes:

•  The tenant pays the deposit to the landlord;

•  The landlord retains the deposit and pays a premium to the insurer;

•  Within 14 days of receiving a deposit, the landlord must give the tenant information about the scheme being used;

•  At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;

•  If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.

•  If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.

Custodial scheme:

•  The tenant pays the deposit to the landlord;

•  The landlord then pays the deposit into the scheme - the key difference to the insurance scheme;

•  Within 14 days of receiving a deposit, the landlord must give the tenant information about the scheme being used;

•  At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;

•  If there is a dispute, the scheme will hold the amount until the dispute resolution service or courts decide what is fair;

•  The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant, or landlord if the tenant isn't entitled to it.

In each scheme, the deposit must be returned within 10 days of the end of the tenancy provided the landlord and tenant have agreed the amount.

The Housing (Tenancy Deposit Schemes) Order 2007 - No 796

The instrument makes amendments to Schedule 10 of The Housing Act 2004. The four main changes which set out in the instrument are as follows:

•  Allowing either the landlord/agent or the tenant to claim the return of all or part of a deposit held in the custodial scheme without agreement from the other party if that party is not contactable or is being uncooperative (custodial scheme only).

•  Cancellation of individual deposit protection or membership in an insurance based scheme and enabling protection in another scheme (insurance based scheme only).

•  Making Alternative Dispute Resolution the 'default' scenario for dealing with disputes when the landlord/agent or tenant is contactable but silent as to how he wishes to resolve the dispute (custodial and insurance based schemes).

•  A general power for the scheme administrators to enable the adjudicator tasked to deal with disputes referred to the scheme's dispute resolution service to decide whether or not it is appropriate for him to deal with a dispute or continue to deal with one, in certain circumstances (custodial and insurance based schemes).

The Housing (Tenancy Deposit) (Prescribed Information) Order 2007 - No 797

The instrument sets out the prescribed information which a landlord/agent must pass onto the tenant at the beginning of the tenancy if he receives a tenancy deposit (i.e. within 14 days of the landlord/agent receiving the money from the tenant).

The Housing (Tenancy Deposit) (Specified Interest Rate) Order 2007 - No 798

The instrument sets out the interest rate which will be applied to a tenancy deposit that is safeguarded in the custodial scheme, when it is repaid to the person entitled to it. .