Most UK landlords are required to put deposits from their tenants in government-approved tenancy deposit protection schemes. Here’s what landlords need to know about deposit protection.
From 2007, it’s been a legal requirement for UK landlords to protect their tenants’ deposits in a government-authorised tenancy deposit protection scheme.
This applies to assured shorthold tenancies, which is the bracket that most private rentals automatically fall into.
It’s not compulsory to take a deposit from your tenants, but if you do then you need to put it in the scheme within 30 days of getting it, and provide your tenants with a copy of the deposit protection certificate.
You also need to supply your tenants with certain information (called ‘prescribed information’), which includes details about the deposit protection scheme you’ve chosen and information about what happens if there’s a dispute over the deposit. See the list of prescribed information on gov.uk. Your deposit protection scheme may help you with this, for example by providing a template.
These rules are intended to protect tenants, making sure that they get their deposit back as long as they pay the rent and meet the terms of their tenancy agreement, and they don’t damage the property.
The government-approved deposit protection schemes in England and Wales are the Deposit Protection Service (DPS), mydeposits, and the Tenancy Deposit Scheme (TDS). It’s up to you to choose which scheme to put the deposit into.
The government-approved deposit protection schemes in Scotland are the Letting Protection Service (LPS) Scotland, mydeposits Scotland, and SafeDeposits Scotland. Again, it’s entirely up to you which one you use.
Once you’ve put a deposit in a tenancy deposit scheme, the scheme will provide you with a receipt or certificate. The rules require you to give a copy of this tenancy deposit protection certificate to your tenants, and to anyone else who has contributed to the deposit.
Fees and fee structures vary, so it’s worth comparing the prices and services offered by each government-approved provider.
There are two main types of deposit protection scheme: custodial schemes and insured schemes. If you opt for a custodial scheme, you put the deposit in the care of the deposit protection company, and they hold it until the end of the tenancy. If you choose an insured scheme, you keep the tenant’s deposit, and you pay the deposit protection company a fee to insure it.
Custodial schemes are usually free of charge, while insured schemes cost around £13 to £20 for deposits up to £500, and around £18 to £26 for deposits over £500. This fee covers the term of the tenancy. Keep in mind that you may also have to pay a membership or joining fee.
If you don’t protect your tenant’s deposit within 30 days, you’ve broken tenancy deposit protection rules, and your tenant can take court action to claim compensation.
Tenants can claim compensation of one to three times the value of the deposit, and the court can order you to protect the deposit if you still haven’t done so.
If you have an assured shorthold tenancy and you fail to protect your tenant’s deposit, your tenant can take you to court to get compensation. The court can demand that you pay compensation of up to three times the value of the deposit, and they may also order you to protect the deposit or to return it to the tenant.
If you want to evict your tenant, your rights to do so will be restricted if you haven’t protected their tenancy deposit.
If you haven’t protected the deposit, you should do so as soon as possible.
Do you have any remaining questions about tenancy deposit protection? Ask us in the comments.
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