Most UK landlords are required to put tenant deposits in a government-approved tenant’s deposit scheme.
Here’s what landlords should know about deposit protection scheme law, with expert input from Saiful Ahmed, a legal adviser at legal dispute specialists DAS Law. This article isn’t advice, please use it only as a guide and speak to a professional if you’d like more information.
From 2007, UK landlords have been legally required to protect their tenants’ deposits in a government-approved 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 protect tenants by making sure they get the deposit back – as long as they pay rent, meet the terms of their tenancy agreement and don’t damage the property.
Saiful Ahmed, from DAS Law, explains what you can charge for under the tenancy deposit scheme:
There are a number of government-backed deposit protection schemes that landlords can use, depending on where you live in the UK.
The schemes come in two different types. 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.
It’s up to you to choose which scheme to put the deposit into.
Legal expert Saiful Ahmed mentions that landlords and their agents can choose to use either of these schemes: “Each scheme has its own rules about the initial requirements that need to be fulfilled to protect the deposit.
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.
As with the rest of the UK, there are three appointed deposit protection scheme administrators in Northern Ireland. These are the Tenancy Deposit Scheme Northern Ireland, My Deposits Northern Ireland and the Letting Protection Service NI.
Fees and fee structures vary, so it’s worth comparing the prices and services offered by each government-approved provider.
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.
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.
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.
So if you haven’t protected the deposit, you should do so as soon as possible (if you don’t protect your tenant’s deposit within 30 days, you’ve broken tenancy deposit protection rules).
Saiful Ahmed, from DAS Law, explains: “The Tenant Fees Act 2019 started on 1 June 2019 and applies to all assured shorthold tenancies, tenancies of student accommodation and licences to occupy housing in the private rented sector in England.
“The act limits the amount you can charge a tenant for a holding deposit and security deposit and defines what you can charge in addition to rent. Certain fees and charges are permitted under the act, whereas others are defined as prohibited payments.”
The maximum amount you can charge tenants as a deposit is explained above and we have a guide that discusses what fees landlords can still charge after the Tenant Fees Act.
As deposits are capped, Saiful goes on to mention other steps landlords can take to reduce their risk: “Landlords can carry out credit checks to assess how much the tenant can afford to pay and the sort of income they have. When a landlord is running a credit check on a tenant, they will only be able to see publicly available data on the resulting credit report.
“Landlords should consider using a full tenant referencing service, instead of requesting just a simple credit check. Tenant referencing agencies specialise in tenant screening for landlords and can deliver much more detailed reports. These will provide a more in-depth overview of your tenant’s suitability for your property.”
Would you like to know any more about deposit protection scheme law? Let us know in the comments below?
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