Sam Dunn: 'Do I have to register as a buy-to-let landlord?'

House Doctor

Question: We decided to invest a small inheritance and savings in a buy-to-let property and our first tenant – on a standard so-called "Assured Shorthold Tenancy" [ASTs] – has so far been no problem at all. However, a colleague of mine says I need to join a Government scheme for deposits but thinks it's only for professional landlords. Is he right?

Kathleen Roberts, Portsmouth

Answer: While you're no Rigsby from Rising Damp, your credentials as a new landlord are severely lacking – as it stands, you're breaking the law. New regulations give tenants greater rights and easier access to get their deposits back.

Sadly, too many landlords were refusing to hand back deposits or making unjust and outrageous deductions. Today, being a new landlord means you must sign up to the Tenancy Deposit Protection Scheme – and you need to act fast. Since April 2007, it applies to all deposits from tenants paying rent of up to £25,000 a year taken by landlords (and letting agents) for ASTs in England and Wales.

This safety net ringfences the tenant's cash and, vitally, gives him or her a lifeline in the event of a dispute. If, say, you disagreed over the flat's cleanliness at the end of his tenancy and kept back part of their deposit, he could then appeal. It would act as arbiter and it would be up to you to prove why you should be allowed to retain all or part of the tenant's deposit.

"Whenever such a deposit is taken from a tenant, it must be protected in a government-initiated scheme," says a spokesman for online property agent Prime location.com. You have a choice of two types of scheme – a "custodial" or "insurance-based" – overseen by the Department of Communities and Local Government. So far, only three companies run either type of scheme.

On one side, you have the custodial Deposit Protection Service ( www.depositprotection.com) which safeguards the deposit and releases it at the end of the rental agreement.

Free to use, it's funded from the interest earned from all landlords' deposits – and you can register and make transactions online.

Or there's the confusingly-named Tenancy Deposit Scheme ( thedisputeser vice.co.uk) and separate MyDeposits scheme ( my deposits.co.uk), the latter being a partnership between the National Landlords Association and Hamilton Fraser Insurance.

Here, you hold your tenant's deposit but pay an insurance premium – typically £60 to £80 – to cover any claims made by your tenant.

When you've decided which suits you best, you have a legal requirement to then tell your tenant which scheme you've chosen and give him its contact details.

Regardless, you must move speedily and sign up.

If you were found guilty of failing to properly protect their cash, a court could order you to repay three times the amount of the deposit.