Q: I have just signed a tenancy for a flat and paid a month’s rent as a deposit. The letting agent says that the law about deposits has recently changed. What is the position?

A: If a tenant pays a deposit after April 6, 2007, the Housing Act 2004 says that the landlord must sign up to one of three new government-approved schemes.

Each scheme has slightly different rules about how deposits are held and what happens if the landlord wants to deduct something at the end of the tenancy. However, with all three schemes, disputes are handled by an independent adjudicator, who will decide how much of the deposit should be returned to the tenant.

The legislation itself has some specific requirements. A landlord must comply with the initial rules of the relevant scheme. He or she must also give a written notice explaining the tenant’s legal rights within 14 days of the deposit being paid.

If a landlord does not satisfy those requirements (for example, if the written notice is given late) the sanctions are draconian. A court will order the landlord to return anything paid and to pay the tenant a penalty of three times the deposit. The landlord also cannot get possession of the property until the deposit is returned. This new law will be unpopular with some landlords and very lucrative for some tenants.

Mark Loveday is a barrister at Tanfield Chambers (020-7421 5300). E-mail your questions to: property.consumer@thetimes.co.ukk

Times recommends

• Analysis: frustration for everyone - except investors
• Buy-to-let: professional investors cash in on the credit crunch
• Ten things you need to know about house prices