Tenancy deposit protection (TDP) schemes make sure that tenants get their deposits back at the end of a tenancy (as long as they have kept to the terms of the tenancy agreement and have not damaged the property).
When must a tenancy deposit protection scheme be used?
Landlords must protect their tenants' deposits using a TDP scheme if they have let the property on an assured shorthold tenancy on or after 6 April 2007.
If this is not the case (ie the landlord lives in the property with the tenant), then the tenant’s deposit does not have to be protected. It is, however, still good practice to do this.
How should deposits be protected?
Landlords must use one of the three approved TDP schemes to protect tenants' deposits. If any other scheme is used, the deposits are not protected in law. The three approved schemes are:
Under the Deposit Protection Service (DPS) the deposit money is held in a bank account and when the tenancy ends, the money is given to the person entitled to it. Landlords living overseas must use the DPS scheme, unless they employ a UK based letting agent to manage their property. Any landlord can join this scheme and there is no charge for its usage.
Under the MyDeposits and Tenancy Deposit Schemes, the landlord or letting agent keeps the tenants’ deposit but pays a fee to insure it. If the landlord does not pay the tenant the amount they are owed at the end of the tenancy, the insurer will pay the tenant themselves but will then seek to get the money back from the landlord. These schemes may charge a fee for membership and can only be used by members of an approved professional body (where members must have client money protection insurance, e.g. a trade association). This makes sure that if the company goes out of business, the tenants’ deposit will still be protected.
- Association of Residential Letting Agents
- Royal Institution of Chartered Surveyors
- National Association of Estate Agents
- National Approved Letting Scheme
What should tenants be told about deposit protection?
Within 30 days of receiving the tenants' deposits, landlords must give the following information to their tenants:
- the address of the rented property and the amount of deposit paid
- the landlord/letting agent’s name and contact details
- the name and contact details of any third party that may have paid the deposit
- items or services covered by the deposit
- the circumstances in which the landlord can keep some or all of the deposit
- what to do if there is a argument over how much deposit should be returned
What happens if the tenants’ deposits are not protected?
If tenants' deposits are not protected, then the tenants can take the landlord to court and the landlord may have to repay the deposit, plus up to three times the amount. The landlord may also be unable to seek possession of their property depending on the circumstances.