Major Change Brings Most Tenancies Within Protection Rules

Although most new tenancy agreements entered into by private landlords in recent years have been ASTs, not all have taken this form

. Principally those for properties with annual rents in excess of 25,000 GBP were excluded.

Crucially, tenancy deposit protection rules apply to ASTs only, so landlords with higher rental properties have been excused the need to take part in one of the three government-authorised deposit protection schemes.

However, as from 1 October 2010, the upper limit for ASTs is increased to rent of 100,000 GBP per year. Meaning ASTs will be the default type of tenancy agreements for the vast majority of private sector rentals. And all will be subject to the AST tenancy deposit rules.

The move was first announced, but not actually legislated for, by Gordon Brown's Government. It was subsequently confirmed by the new Coalition Government.

Housing Minister Grant Shapps agreed that the change was needed to take account of inflation since the limit was first enacted and also to bring in student lets and the like where there is one agreement in place for the whole property, signed by all the tenants, and the aggregate rent exceeds 25,000 GBP.

This is an important change, since all letting agreements for rents of between 25,000 GBP and 100,000 GBP will automatically become ASTs and deposit protection rules apply.

When a private landlord or letting agent in England and Wales takes a deposit from a tenant, that deposit must be protected in a government-authorised tenancy deposit scheme designed to make sure deposits are held securely and their return or otherwise dealt with fairly to both landlord and tenant.

The three authorised schemes are:

1. The Deposit Protection Service. This is the only custodial deposit protection scheme (meaning the deposit must be handed over for safe keeping). It is free to use and open to all landlords and letting agents. Landlords can register online while the scheme provides a template for the information to be provided to tenants.

2. My Deposits, run by Tenancy Deposit Solutions Ltd. This is an insurance-backed scheme jointly owned by the National Landlords Association and Hamilton Fraser Insurance.

3. TDS Limited, which stands for both Tenancy Deposit Scheme and The Dispute Service - the same organisation, is an insurance-backed scheme. Landlords can join online and access a range of related forms and documents.

It is important that landlords comply with the requirement to protect deposits since if they do not they can be ordered to repay the tenant three times the amount of the deposit.

by: Karl Hopkins

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