Becareful of Deposit Insurance Schemes

Whilst Tenancy Deposit Insurance schemes appear attractive they can indeed be a poisoned challice if you fail to comply with the details contained within the scheme rules ;
  • How many people tick I accept your T&Cs and have actually read the 25 pages of terms and understand what they have agreed to.
  • Well you are agreeing that at the end of the fixed term of the tenancy you will buy new deposit insurance or inform the insurer that you have not renewed the tenancy  - failure to notify may [probably] expose you to a hefty fine of three time the deposit - see below  
Prior to the DPS launching an Insurance Solution Landlords and Agents were paying a much higher price to insure their deposits. It may be a case that the DPS are more efficient or simply a case that the other solution providers prefered to charge more but either way the DPS offering presents better value.
  • No registration or annual renewal fees - unlike Landlord Associations, Mydeposits or TDS are charging 
  • You retain the deposit and protection will be provided to your tenant for the duration of the tenancy
  • Competitively priced Letting Agents** Fee per deposit £9.50 Landlords  £15.00 for deposits under £500 & £22.20 for deposits £500 and over
  • Available to landlords and organisations on a 'pay as you go', per tenancy basis
  • ** Letting agents will be required to be associated with, members of or accredited by RICS, ARLA, NAEA, NALS, UKALA or The Law Society and will be required to agree to monthly invoicing paid by direct debit
  • Volume discounts may be available for letting agents – please contact DPS for further details

Tenancy RENEWAL Word of caution about the insurance conditions

 
DPS Clause 16. Confirmation of an Insured Deposit closure
  • a) The DPS will send the Landlord a reminder 1 month before the Tenancy End Date informing them that The DPS must be notified prior to the Tenancy End Date whether the Tenancy is a) at an end;
  • b) continuing on a periodic basis; or
  • c) renewing as a fixed term Tenancy. If the Landlord does not respond to this notification prior to the Tenancy End Date The DPS will close the Deposit and inform the Landlord and all Tenants that the Deposit is no longer protected. The DPS will send such notification via e-mail, SMS or postal communication.
My deposits Scheme Rules Seventh edition Effective from 1 April 2013
  • C4.1 Prior to the end date of the fixed term AST you must inform us whether the AST is due to terminate, be renewed with a new fixed term or to continue as an SPT*. If the Member does not update the Protection at the end date of the tenancy then we reserve the right to automatically Un-Protect the Deposit at the expiry of the fixed term and inform the Tenant.
  • * NOTE Statutory Periodic Tenancy (SPT) When an AST comes to the end of the fixed term and continues with no defined end date (no fixed notice period is given by either party).
PIMS Comment
 
Non compliance with above requirement could invalidate your right to evict the tenant using the Section 21 and the Tenant may be eligible to seek compensation for failure to comply with deposit protection [1 to 3 times deposit value] 
  • Prior to the Localism Act 2011 if you failed to protect the deposit you could protect it late, issue the precribed information then apply for a possession order. The Tenants could try and sue for compensation for failing to protect the deposit but we could use case law [example Gladehurst or Bamford] and this would absolve us of paying ANY penalty to the Tenant.
  • When the Localism Act came into being it defined that should you fail to protect a Deposit within 30 days the Tenant is eligible to claim mandatory compensation no less than one time the Deposit to three time the deposit value.
  • Should you fail to purchase a new Deposit protection insurance within 30 days of tenancy renewal then the Tenant WILL BE ELIGIBLE to seek mandatory compensation
     
    If you failed to correctly protect a Tenants Deposit this includes compliance with renewal of insurance policy you CANNOT use the Section 21 Process to evict your Tenant see penalties and fines