Rent deposits & residential tenancies

What is a tenancy deposit protection scheme?

A tenancy deposit protection scheme safeguards money paid by a tenant or contract-holder as a deposit in connection with their rented property.

There are three government-approved providers operating tenancy deposit protection schemes in England and Wales:

• Deposit Protection Service
• MyDeposits
• Tenancy Deposit Scheme.

The schemes offer two different methods of protecting a deposit:

• Custodial scheme: the deposit is held by the tenancy deposit protection scheme.
• Insured scheme: the landlord or letting agent retains the deposit and pays the scheme to insure it.

Which option is appropriate will depend on the landlord's circumstances and the scheme being used.

How long does a landlord have to protect a tenancy deposit?

Where the tenancy deposit protection requirements apply, a landlord or letting agent must protect the deposit in a government-approved scheme within 30 days of receiving it.

The landlord must also provide the tenant with the required information concerning the deposit and its protection within 30 days. This includes information about the scheme used, how the deposit is protected, how it can be recovered and what happens if there is a dispute.

For properties in Wales, Welsh Government guidance also confirms that a landlord has up to 30 days to comply with the applicable deposit scheme requirements and provide the required information concerning protection of the deposit.

What happens if a landlord does not protect a deposit?

Failure to comply with the tenancy deposit protection requirements can expose a landlord to a claim from the tenant or contract-holder.

For that reason, landlords who discover that a deposit may have been protected late, incorrectly or not at all should take legal advice before taking further action, particularly where they are also considering possession proceedings.

Our specialist solicitors can review how a deposit has been dealt with, advise you on any potential breach and assist if you are facing a tenancy deposit compensation claim.

What information must a landlord provide about a deposit?

Protecting the deposit itself is only part of the landlord's obligations.

The landlord must also provide the required information about the deposit, including:

• the address of the rented property;
• the amount of the deposit;
• how the deposit is protected;

details of the relevant tenancy deposit protection scheme and its dispute resolution service;

• relevant landlord or letting agent contact details;
• circumstances in which some or all of the deposit may be retained;
• how the tenant can apply for the return of the deposit; and
• what happens if there is a dispute.

If you are unsure whether the correct information has been provided, our tenancy deposit solicitors can review your documentation and advise you on your legal position.

What happens to the deposit at the end of the tenancy?

Where the landlord and tenant agree how much of the deposit should be returned, the deposit must be returned within 10 days of agreement.

If there is a disagreement about proposed deductions, the deposit remains protected while the dispute is resolved. In an insured scheme, the landlord or agent must provide the disputed deposit to the tenancy deposit protection scheme, which holds it while the dispute is being determined.

Disputes can arise over matters including:

• rent arrears;
• damage to the property;
• cleaning;
• missing items; and
• the condition of the property at the end of the tenancy.

Our specialist landlord solicitors can advise on the evidence available to support proposed deductions and assist with tenancy deposit disputes.

Custodial scheme

Under a custodial deposit protection scheme, the deposit is paid to and held by the scheme.

At the end of the tenancy, the deposit can be returned in accordance with the parties' agreement. If there is a dispute, the deposit remains protected while that dispute is resolved.

Insurance based schemes

Under an insured deposit protection scheme, the landlord or letting agent keeps the deposit and pays the scheme to insure it.

Where the amount to be returned is disputed, the disputed sum must be passed to the scheme so that it can be held until the dispute is resolved.

Tenancy deposit disputes

Disputes commonly arise at the end of a tenancy where the landlord and tenant disagree about whether deductions should be made from the deposit.

Tenancy deposit schemes provide a dispute resolution service for disagreements over the return of a deposit.

Clear evidence can be particularly important where deductions are disputed. If a deposit dispute cannot be resolved, our landlord and tenant solicitors can advise you on your position and the options available.

Tenancy deposit claims against landlords

If a tenant or contract-holder alleges that you have failed to protect their deposit correctly, it is important not to ignore the issue.

Our specialist landlord solicitors can advise you on:

• whether the deposit protection requirements applied;
• whether the deposit was protected correctly;
• whether the required information was provided;
• late deposit protection;
• claims arising from alleged non-compliance;
• disputes over deposit deductions; and
• any implications for related possession proceedings.

Taking advice at an early stage can help you understand your legal position and determine the most appropriate response.