Home » Resources for Landlords » A-Z Glossary of property investing terminology » What landlords need to know about Deposit Protection Schemes

What landlords need to know about Deposit Protection Schemes

what is a deposit protection scheme

A deposit protection scheme is a government-authorised scheme that protects tenants’ deposits. It will ensure that tenants will get back their deposit if they comply with the terms of the tenancy agreement, don’t damage the property and pay the rent and bills.

It’s illegal for a landlord to ask a tenant to pay a deposit of more than 5 weeks’ rent.

This page contains affiliate links. If you buy something after clicking through, you’ll be supporting this free blog. Thank you!

What are the different Deposit Protection Schemes in England?

There are three deposit protection schemes in England:

The difference between custodial and insured protection for deposits

All schemes offer two types of protection for the tenant’s deposit:

  • Custodial protection: the landlord or agent forwards the deposit to one of the authorised tenancy deposit scheme providers who keeps it in a secure bank account until the end of the tenancy. The scheme does this for free as they keep the interest on the deposit. The landlord will be able to see the deposits on the dashboard of the scheme provider.
  • Insured protection: the landlord or the agent holds the deposit and pays the scheme to insure it. The cost to landlords for a deposit over £500 for all three deposit schemes is a one-off payment that’s under £30. MyDeposits offer a £9.25 discount to NRLA members, bringing the cost down from £27.20 to £17.95. NRLA members also have a discounted price with the Tenancy Deposit Scheme‘s insured option of £17.95 for deposits over £500 offer discounts for NRLA members. Click here to join the NRLA.

If a landlord hasn’t told the tenant where or how the deposit is protected, the tenant can check scheme providers’ websites. They’ll need to enter a few details, e.g. postcode, surname and the date they started the tenancy (which will be in the tenancy agreement).

A landlord must place all tenants’ deposits in a deposit protection scheme if they rent property under an assured shorthold tenancy, within 30 days of receiving the money.

Also, the landlord or letting agent must provide prescribed information concerning the registration of the deposit within 30 days of receiving the deposit. Click here for full details of the prescribed information.

Although it is possible to delegate these obligations to a letting agent, the landlord remains responsible for this if it is not done. Landlords should set a calendar reminder to follow up with the agent and check it’s done before the 30 days are up.

If landlords use OpenRent’s Rent Now service for £69, the deposit registration is done automatically by OpenRent in a MyDeposits custodial scheme. Click here find out more about using online agents to find renters.

What if the landlord doesn’t comply with deposit obligations?

Failing to register the deposit and provide the prescribed information within the 30 day timescale is serious. It may be due to an oversight on the part of the letting agent or landlord, but the important thing is to fix it.

Firstly, the landlord will usually be unable to provide a valid Section 21 Notice to evict the tenant if they’ve not complied with their obligations. Additionally, the tenant may also apply to court for compensation equivalent to up to three times the value of the deposit.

The only way to rectify this serious breach of the law is to return the deposit to the renters. A landlord could do this when deciding to renew the tenancy for a fixed term, and ask the tenant to give another deposit, which they will then protect properly.

What happens to the deposit at the end of the tenancy?

inventory being undertaken by an inventory clerk

The tenant has the right to get back the deposit at the end of the tenancy. The landlord or letting agent can only take money off if there’s a good reason. Here are some examples of good reasons for a landlord to make deductions from the deposit:

  • The tenant owes rent or hasn’t paid bills.
  • The property is not left in the same condition as at the start of the tenancy. The landlord can deduct reasonable cleaning and redecoration charges.
  • The tenant has damaged the property beyond normal wear and tear. For example, a spill on the carpet or holes on the wall from where they’ve hung a television.
  • Some of the items in the inventory, like the drawers inside the fridge or freezer, are damaged or missing

If the landlord (or letting agent) and the tenant agree on the deductions, the landlord must return the deposit within 10 days of them both agreeing on the amount.

If they don’t agree, the tenant can use the deposit scheme’s alternative dispute resolution (ADR) service to challenge the landlord. In the meantime, the deposit will still be protected in the scheme. Both parties will need to provide evidence, and the decision made about the deposit will be final. The dispute resolution is free and will look at the evidence objectively.

Click here for tips on achieving a smooth end of tenancy check-out, and for why it’s important to have an inventory at the start and end of a tenancy. If the landlord doesn’t do an official inventory, the tenant should take photos when they move in.

>> Related Post: What deductions can landlords make from tenant’s deposits?

You may also find helpful

Scroll to Top