Rent Deposit Schemes

There are two major deposit schemes

  • The Custodial Scheme
  • Insurance Based Scheme

Custodial Scheme

  • This is the most appropriate scheme for landlords who hold a small number of rental properties. The scheme provider holds the deposit on behalf of landlords and tenants
  • Neither the landlord nor the tenant pay any fee to use the scheme
  • At the end of the tenancy, the landlord and tenants must jointly ask for the deposit to be repaid
  • If they agree on the proportion the deposit will be distributed accordingly plus any surplus interest it may have generated
  • In case of a dispute between landlord and tenant the scheme offers an Alternate Dispute Resolution (ADR) service to assist the parties
  • The tenant can also lodge a claim to a court under small claims, the scheme provider will then distribute the deposit in the light of the decision of the court or ADR

The Insurance Based Scheme

  • This scheme is more suitable for professional landlords with a large number of rented properties or for letting agents
  • Under the insurance-based scheme the landlord retains the deposits, however, pays a fixed premium to the scheme provider
  • In the case of a dispute between the Landlord and the Tenant, the Insurance scheme provider will intervene. It will offer an Alternate Dispute Resolution service
  • The landlord then must hand over the deposit to the insurer until the dispute is resolved either by ADR or by court
  • The failure of a landlord to deposit the amount to the insurer will not affect the tenant as the insurer will compensate the tenant

Rent Deposit Scheme providers

For further advice, information and guidance visit www.legalally.co.uk

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