Tenancy Deposit Scheme: Information for Landlords

The Government's new Tenancy Deposit Scheme came into force on the 6th April 2007. Since then, any tenancy deposits received in connection with an AST - assured shorthold tenancy - must be handled in accordance with one of the three Government approved schemes. This is to ensure the tenant’s deposits are protected.

The information below is correct as of April 6, 2012.

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 is 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 are 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. This must be done within 30 days of receiving the deposit.
  • Within 30 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.This must be accompanied by the Scheme leaflet.
  • 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;
  • No fee is payable.

Insurance-based schemes:

  • The tenant pays the deposit to the landlord;
  • The landlord retains the deposit registers it with the Scheme within 30 days of receipt and pays a fee to the scheme administrator - the key difference to the custodial scheme;
  • Within 30 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. This must be accompanied by the Scheme leaflet.
  • 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.

Example: a tenant pays a deposit of £ 1000. At the end of the tenancy the landlord says he wishes to keep £200 to pay for replacing damaged furniture. The remaining £800 will be returned to the tenant.

The tenant disagrees, claiming the furniture was damaged when they moved in. Both agree to go to ADR, so the disputed £200 will be transferred to the scheme administrator until the dispute is settled.

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

More Information

! WARNING !

If you take a tenancy deposit which should be protected but you fail to comply with the tenancy deposit protection legislation then –

  • Following a Court Order you face a penalty of three times the amount of the deposit.  This is an automatic penalty and cannotbe reduced.
  • You cannot serve a valid Section 21 notice so as to bring the tenancy to an end on the so called notice only/shorthold ground.  It does not, however, stop you serving notice under Section 8 (e.g. in relation to rent arrears or other tenancy breaches).

Important – Disclaimer

The information contained on this website is provided by the Residential Landlords Association (RLA) in good faith based on available legal advice.  However, ultimately, interpretation of legislation is a matter of the Courts.  As with any legislation there will be Court decisions which will affect its interpretation.  The RLA, its directors, officers and employees, cannot accept liability for any claim, whether legal or otherwise, for any advice given or statement made in relation to the tenancy deposits.  This includes information given by the RLA through its help line  or any other literature distributed by the RLA.  All such liability is expressly disclaimed.  Landlords must take their own professional advice and should rely on this; not any advice given by the RLA.

Landlord & Investment Show
Martin Co
Envirovent
Landlord Broadband

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