Landlords not covered by TDS insurance

Buy-to-let landlords are potentially at risk of having to pay a tenants deposit back out of their own coffers if their letting agent goes bust according to a recent report in the Times.

The tenancy deposit scheme (TDS) require a landlord to use one of the approved schemes and ensures a tenants deposit is protected. However, where the letting agent retains the deposit and then goes bust the landlord is still liable to repay the tenant their deposit out of their own monies. The insurer of the tenants deposit will pay the tenant their deposit back and then in the absence of the letting agent reclaim the monies direct from the landlord.

As a result both insurance backed schemes will now only insure deposits from letting agents that are members of an approved professional organisation such as ARLA where the deposit is bonded thereby protecting the landlord in the case of the letting agent going bust.

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