Why do I need an inventory company?

The government has now awarded contracts to three companies to run tenancy deposit protection schemes from 6 April 2007.

Statutory tenancy deposit schemes will apply to all assured short hold tenancies, where a deposit is taken after April 6 2007, in England and Wales.

There are two types of scheme: a single custodial scheme (where deposits will be paid into and held in a separate account managed by the scheme); and two insurance based schemes where the landlord or agent will hold the deposit and any failure on his/her part to repay it to the tenant will be covered by the scheme’s insurance arrangements.

The custodial scheme run by Computershare Investor Services Plc will be free to use for tenants and landlords. The scheme will be funded by the surplus from interest generated on the pool of deposits, with interest also being paid to tenants.

The two insurance based schemes, run by The Dispute Service Ltd and Tenancy Deposit Solutions Ltd sponsored by The National Landlords Association, will be funded through a fee paid by landlords or agents. The service will be free to tenants (the law prohibits these charges being passed on to tenants).

Failure of a landlord to comply and safeguard any deposit taken will mean they cannot issue a Section 21. In addition, the tenant will be automatically entitled to 3 times the deposit amount as compensation!

All three schemes will offer alternative dispute resolution (ADR) services which will be free to use for both landlord and tenant.

Where landlord and tenant are in agreement at the end of the tenancy, the deposit will be split according to their agreement.

Where a dispute arises then two options are available. If both landlord and tenant agree they can use the free ADR service. An adjudicator will assess all documentation and make a judgement which both landlord and tenant will be bound by.

If either landlord or tenant do not agree to use the ADR service then the matter must be referred to court for judgement.

A thorough, detailed, accurate and unbiased inventory will now be vital in the event of a landlord wanting to claim against a tenant’s deposit. Lawrence Greenberg, Chief Executive of the Dispute Service Ltd (who have been awarded one of the new contracts and will also be running the dispute resolution service for that contract) was recently quoted in Agreement (ARLA magazine) as saying that whilst inventories are not a legal requirement, without one, and a good one at that, you may as well not bother even taking a deposit!