It is a legal obligation for landlords in England and Wales to put all tenant deposits into a government-approved tenancy deposit scheme (TDS) if they are renting out a property on an assured shorthold tenancy (AST). There are similar schemes for landlords in Scotland and Northern Ireland.

A deposit gives the landlord added peace of mind should a tenant damage the property while they’re living there or leave without paying rent. Typically, landlords should ask for a deposit that’s the equivalent of four to six weeks rent. When a tenant pays a deposit, it must be put into the scheme within 30 days. Even if the deposit is paid by someone else, it still needs to be paid into a scheme. 

The schemes are designed to protect tenants and landlords and help oversee the process of deposit returns, deductions and disputes. Tenants will get a deposit back if they:

·       Meet the terms of the tenancy agreement

·       Don’t damage the property

·       Pay outstanding rent and bills

In England and Wales there are three main schemes: Deposit Protection Service (DPS), MyDeposits and Tenancy Deposit Scheme. As a landlord, you must comply with the law regarding tenancy deposits; failure to do so might affect your right to reclaim rent arrears should the tenant miss any payments. 

If you do not protect the tenant’s deposit or give them adequate details and information about where their money is being held, tenants are well within their rights to claim the return of the deposit. Alternatively, a judge can order its return on their behalf. Landlords could also face a fine of between one and three times the amount of the deposit. Not protecting a deposit also means a landlord can’t evict a tenant using a Section 21 notice. 

As part of the process it’s your legal right to give potential tenants the following information:

• Full address of the rental property

• How the deposit is protected

• Name and contact details of the tenancy deposit protection scheme and up to date details of the dispute resolution service

• Name and contact details of the letting agent (or your details if you are the agent)

• Name and details of any third party that has paid the deposit

• Possible reasons why you would be likely to keep some of the deposit

• Details of how tenants can claim their deposit back

• What tenants should do if they can’t get hold of the relevant person at the end of the tenancy agreement

• How tenants can resolve disputes over the return of a deposit

Looking for the best scheme? Find out more here.

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Disclaimer: This article is for information only and is not official guidance, FCA approved, or legally precise.