Tenancy Deposit Protection – Which is right for you?
Since the Housing Act came into effect in 2004, as a landlord, it has been a legal requirement to put your tenants’ deposit into a government-approved tenancy deposit scheme if you rent your home on an assured shorthold tenancy that started after 6 April 2007. In England and Wales your deposit can be registered with:
The schemes are designed to keep the tenant’s money safe and to help make sure they get back what they are owed at the end of your tenancy. There are two types of schemes offered by the government-approved providers, insured and custodial.
Custodial or Insured, which option is best for you?
The custodial deposit protection schemes are ideal for landlords who don’t want to hold the deposit themselves and is usually free for landlords to join and use.
Custodial scheme
A custodial scheme protects a tenant’s deposit because:
- the scheme administrator holds the deposit until it is required to be paid back
- the deposit is safe if the landlord or their letting agent goes out of business
Insured deposit protection scheme
The insured deposit protection scheme is completely free to join. As a landlord, you pay a small fee to protect each deposit, which means you can keep your deposit in your bank account for the duration of the tenancy, keeping the accrued interest and at the end of the tenancy, you as the landlord would administer the repayment with the tenant. If the tenant disputes any deductions, the protection schemes you joined would provide a free dispute resolution service.
| Custodial | Insured |
Deposit held by | Scheme provider | Landlord |
Cost | Free | Small fee |
Landlord/Agent must provide prescribed information | Yes | Yes |
Can return the agreed deposit without involved scheme | No | Yes |
Must involve scheme with disputes | Yes | Yes |
Free alternative dispute resolution | Yes | Yes |
Dispute decision is final | Yes | Yes |
How much should the deposit be?
The tenancy deposit will usually be the same amount as 4 or 5 weeks’ rent as it is now illegal for landlords to force tenants to pay a deposit of more than 5 weeks’ rent (or 6 weeks’ rent if the annual rent is more than £50,000).
It’s all about timing
Landlords or letting agents must put the deposit in the scheme within 30 days of getting it and then provide the tenant with the ‘prescribed information’ which includes details about the property and your deposit. Once you have registered with a scheme will give you the option to print out the ‘prescribed information’. Landlords cannot evict tenants with a section 21 notice if they haven’t given their tenants this information.
At the end of the tenancy
Landlords must return a tenant’s deposit within 10 days of both agreeing how much will be paid back after you have dealt with any issues that may require a deduction from the rent (i.e. unpaid rent, damage to the property etc.).
If the tenants dispute the amount to be paid back then the deposit will be protected in the Tenancy Deposit Protection scheme until the issue is sorted out.
Need to fix a repair or breakdown?
Landlord Blog
Demystifying the Section 8 Notice: A Comprehensive Guide for Landlords
When it comes to managing rental properties, landlords occasionally find themselves in situations where tenants are in breach of their tenancy agreements. In such cases, a Section 8 notice can be a valuable tool to regain possession of the property.
Navigating the Rental Revolution: A Deep Dive into the Renters’ Reform Bill
The Renters’ Reform Bill is a hot topic in the UK, aiming to bring a wave of change to the rental market. We’ve rounded up all you need to know about this exciting development and will keep you updated as the details unfold.
A Comprehensive Guide: How Landlords Can Prepare for Bailiff Evictions in the UK
Evictions can be a challenging and distressing process for landlords in the UK, particularly when the tenant is uncooperative or has failed to pay rent. If all other methods to resolve the situation have been exhausted, landlords may need to consider the last resort – applying for a bailiff eviction.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Please read our full disclaimer.
