Tenancy Deposit Protection Schemes

Deposit protection schemes have strengthened tenants’ rights in recent years, helping to make sure more tenants receive their full deposit back when they leave a property, while still giving landlords the right to claim reasonable deductions for cleaning and repairs.

It is common practice for landlords to request a monetary deposit from a tenant at the start of the tenancy in order to cover any such costs incurred when the tenancy is over, but in recent years this money is not held by the landlord, and is instead placed in a third party protection scheme.

Landlords will hand the amount over to a deposit protection scheme that is designed to hold the money until the tenancy agreement comes to a close, and this gives the tenant some protection against unfair deductions, while also ensuring landlords cannot spend the deposit money, for example on a holiday or on items for their own home.

Finding a deposit protection scheme

If you are a landlord with property in England or Wales, it is a requirement that any deposit taken from a tenant must be protected by an accredited deposit protection scheme. If you are not sure which schemes qualify, ask PDA Law and we will be happy to advise you on finding a deposit protection scheme with the right government approval.

There are exceptions, although not many. For example, you may allow a tenant to give you ownership of a valuable item, such as an expensive watch or their car, in lieu of a cash deposit; in these cases, you can retain ownership of the item without signing it over to a third party.

Our team of solicitors has a great deal of experience within this area of the law, and we have helped a number of clients join a scheme to protect both themselves and their tenants. To speak to a member of our team, call 01244 373 373 today.

What is a deposit protection scheme?

All of the current government-authorised schemes offer two options:

  • Custodial schemes
  • Insurance-based schemes
    • If you choose a custodial scheme, you hand the money over to the scheme, and they hold it for free until it needs handing back to the tenant.

      An insurance-based scheme is slightly different, as it actually allows the landlord or a named agent to hold the deposit money, but in this instance you have to pay a fee to the scheme in order to insure the money.

      Schemes usually offer a free dispute resolution service should tenant and landlords face a disagreement over a deposit, but you may also want to seek legal advice in relation to any deposit disputes, especially if you disagree with the verdict of the scheme’s own dispute resolution service.

      A landlord’s responsibilities

      It is a landlord’s duty to protect a tenant’s money using a deposit protection scheme. Within 30 days of receiving the deposit, the landlord must place the money into a protection scheme and provide their tenant with the following details:

      • The details of the deposit scheme used
      • Information on how to apply for release of the deposit
      • Information explaining the purpose of the protection scheme
      • Advice on what to do if there is a deposit dispute

      Failing to protect a tenant’s deposit can result in fines and legal complications, and may even make it impossible to legally evict the tenant, even when the tenancy agreement expires.

      Deposit money must normally be paid back to the tenant within ten days at the end of the tenancy, unless there is a dispute over how much will be paid. If you receive money as a ‘holding deposit’ before the tenancy agreement is signed, you do not have to put it into a scheme immediately, but should do so within 30 days once the tenant signs.

      Tenants’ responsibilities

      For a tenant to have their full deposit returned to them once the agreement comes to a close, they must:

      • Meet any agreed terms of your tenancy agreement
      • Maintain the property in a reasonable condition and leave it without damage
      • Pay any outstanding rent and bills
      If you dispute the amount your landlord offers to pay back to you at the end of your tenancy, your money will still be held by the scheme until any disputes are resolved. You are under no obligation to use the scheme’s own dispute resolution service if there is a disagreement, and PDA Law are happy to offer advice no matter what stage your dispute has reached.

      Contact PDA Law’s Landlords & Tenants Team

      At PDA Law, we are here to help both tenants and landlords with any disputes over deposit schemes and breaches of tenancy agreements. Our expert team will provide you with tailored advice to help you every step of the way.

      To speak to a specialist solicitor today, simply call 01244 373 373 or complete our online contact form and we will be in touch as soon as possible.