Landlords are being warned that a failure to adhere to a government-approved tenancy deposit protection (TDP) scheme could have serious consequences.
Buy-to-let mortgage lender Paragon Mortgages is advising landlords that the mandatory schemes, which were introduced six months ago, must not be ignored.
If disputes regarding deposits arise between landlords and tenants and the landlord has not signed up to one of the three schemes, they could face fines of up to triple the amount of the original deposit.
Managing director, John Heron, said: “Most landlords have embraced the new rules and are already happily working with them. But those landlords that haven’t joined a scheme could find that they are unable to evict tenants if they have caused damage to a property or that they could pay out three times the deposit back if they end up in a dispute.”
The three schemes available are the Deposit Protection Service, which holds the deposit directly and returns interest to tenants when they leave, or the Tenancy Deposit Solutions and Tenancy Deposit Scheme, which are both insurance-based. Both permit the landlord to keep hold of deposits, but force them to pay the insurer a premium.
According to Paragon, 37 per cent of customers opted for the Tenancy Deposit Scheme, and 48 per cent claimed that the schemes had made carrying out their business more difficult.
“Without the protection of a scheme, landlords are leaving themselves open. It doesn’t make business sense and it could also mean that the landlord is breaking the law,” said Mr Heron.
However, the National Landlords Association has estimated that three-quarters of landlords have not registered yet with a scheme.
Find out more about buy-to-let mortgages
, Paragon mortgages
and UK landlord insurance