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Last Updated: Friday, 6 April 2007, 00:06 GMT 01:06 UK
Safeguards for tenants' deposits
To Let sign
Tenants could earn interest on their deposits
New rules to protect deposits paid by private tenants in England and Wales have come into force.

They aim to prevent landlords unfairly holding back all or part of a deposit when tenants leave their property.

All landlords and letting agents will have to sign up to the Tenancy Deposit Protection scheme and disputes will be handled by a free resolution service.

Communities Secretary Ruth Kelly said some landlords were "profiteering from other people's money".

There is an estimated 1.2bn tied up in shorthold tenancy deposits in England and Wales.

But 17% of tenants say they have had some or all of their money withheld without good reason.

'Greater fairness'

Mrs Kelly said the sums of money involved were "significant", on average about 700, and therefore it was important that people paying them in "good faith" were not wrongly left out of pocket.

"The vast majority of landlords and agents act fairly and take their responsibilities seriously," she said.

"However, there are a minority pocketing deposits and profiteering from other people's money.

"This is completely unacceptable. The new rules will inject greater fairness into the rental market and mean that when a tenant sticks to the rules, the landlord or agent must too."

Getting back deposits from a minority of unscrupulous landlords puts tenants in a David and Goliath situation
Adam Sampson

All new deposits will have to be secured with one of three schemes, under the Housing Act 2004.

One holds the deposits directly, returning the interest to the tenant when they leave.

The other two schemes will provide insurance cover if a landlord defaults.

These will cost landlords and tenants a fee, but will allow them to keep the interest earned.

In the event of a dispute, all of the schemes will hold onto the money until the matter is resolved.

If a landlord takes a deposit but fails to use any of the protection procedures, then he forfeits his normal rights to eviction and could be fined.

Adam Sampson, chief executive of homelessness charity Shelter, said: "Getting back deposits from a minority of unscrupulous landlords puts tenants in a David and Goliath situation and often leaves them out of pocket.

"This scheme provides a vital safety net for both tenants and responsible landlords, which should ensure the rental system is fairer for everyone."

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