Renting a home Tenancy deposit protection

Your landlord must protect your deposit in a special tenancy deposit scheme

In the past, landlords and tenants have had disagreements over the return of a deposit for renting a property. If a landlord felt that a tenant had caused damage to a property, they could simply withhold some or all of the deposit at the end of a tenancy.

If a tenant feared they wouldn’t get their deposit returned to them, they could refrain from paying their last month’s rent and there was little the landlord could do about it.

In an effort to regulate the system and ensure that neither party loses out unfairly, the government introduced two types of deposit protection scheme in April 2007. One scheme is paid for directly, and one is paid for using the interest accrued by the deposit amount.

They apply to anyone who signs an assured shorthold tenancy agreement in England and Wales. Any disputes arising over return of deposits can be resolved through the scheme.

Your letting agreement should include information about which scheme your landlord or letting agent is using.

The custodial tenancy deposit scheme

Landlords pay deposits into the Deposit Protection Service, which can be done online and by phone. It’s ‘free’ to landlords and letting agents as the scheme uses part of the interest earned from holding the deposit to cover costs.

When it gets to the end of the tenancy, both parties have to agree on the amount of deposit to be returned in order for the scheme to release the funds. Funds are then released directly into the tenant’s bank account.

Insurance-based tenancy deposit schemes

There are two options: My Deposits or the Tenancy Deposit Scheme (TDS). You pay your deposit to the landlord/agent. The landlord keeps the deposit during the tenancy (and any interest payable) and pays a premium to the insurer.

Tenancy deposit protection for tenants

If your deposit is not protected by one of these schemes, then you should think carefully before renting. Tenancy deposit protection (TDP) ensures that if you think your landlord or letting agent is unfairly retaining your deposit, an independent arbiter will consider your case free of charge.

If there’s a dispute, and all parties agree to the scheme arbitrating it, the relevant information is collected by the scheme operator. An in-house or external independent examiner is then appointed to recommend a solution

Scotland and Northern Ireland

To date, Scotland has passed the law to bring in TDP but a scheme is not yet up and running. There are proposals to introduce TDP in Northern Ireland.

For more advice, see our book Renting & Letting which contains everything you need to know to navigate the rental market.