An Overview of Tenancy Deposit Protection

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What is the Tenancy Deposit Scheme?

From 6 April 2007, all deposits taken by landlords under Assured Shorthold Tenancies (ASTs) in England and Wales must be protected by a tenancy deposit protection scheme. Landlords must not take a deposit unless it is dealt with under a tenancy deposit scheme.

To avoid disputes going to court, each scheme will be supported by an alternative dispute resolution service (ADR).

Deposits taken in connection with non shorthold tenancies do not have to be dealt with under the Scheme.

How does Tenancy Deposit Protection work?

Landlords will be able to choose between two types of scheme: a single custodial scheme and two insurance-based schemes.

What is the Custodial Scheme?

• The tenant pays the deposit to the landlord
• The landlord then pays the amount of deposit into the scheme. For more information on how do to this, click here.
• Within 14 days of receiving a deposit, the landlord must give the tenant the prescribed information about the scheme being used. For the prescribed information, click here.
• At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;
• If there is a dispute, the scheme will hold the amount until the dispute resolution service or courts decide the dispute;
• The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be paid on the amount refunded. The rate of interest is currently bank base rate less 2.32%.

Insurance-based schemes:

• The tenant pays the deposit to the landlord;
• The landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme;
• Within 14 days of receiving a deposit, the landlord must give the tenant prescribed information about the scheme being used and the tenancy. For the prescribed information, click here.
• At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;
• If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.
• If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.

Returning Deposits

In each scheme, the deposit must be returned within 10 days of the landlord and tenant agreeing how the deposit should be divided, or within 10 days following notification of an ADR/court decision.

If you haven't found the information you are looking for, try our Frequently Asked Questions (FAQ) page by clicking here

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