How to Deal with a Deposit

12 September 2021

The landlord must place the tenants’ deposit in a tenancy deposit protection (TDP) scheme if they rent out a property on an  Assured Shorthold Tenancy (AST) that started after 6 April 2007.

These government-backed schemes ensure the tenants will get their deposit back if they:

  • meet the terms of the tenancy agreement
  • don’t damage the property
  • pay the rent and bills

The landlord must put the tenants’ deposit in the scheme within 30 days of receiving it. The landlord must use a TDP scheme even if the deposit is paid by someone else, like a rent deposit scheme or a tenant’s parents.

Available Schemes

The landlord can use any of the following schemes if the property is in England or Wales:

There are separate TDP schemes in Scotland and Northern Ireland.

All TDP schemes offer 2 options:

  • the scheme hold the deposit for free - known as a ‘custodial’ scheme
  • you or the agent holds the deposit and you pay the scheme to insure it - known as an ‘insured’ scheme

Holding Deposits

If the landlord received a holding deposit from your future tenants (money to ‘hold’ a property before an agreement is signed), you don’t have to protect it. Once they become tenants the holding deposit becomes a deposit, and you must protect it.

At the End of the Tenancy

The deposit must be returned to the tenants within 10 days of agreeing how much they’ll get back.

Disputes

In the case of a dispute, the deposit is protected in the scheme until the issue is settled. There is a dispute resolution service built into all the schemes which is free to use but not mandatory. Where this is used, the decision is binding on both parties.

If the deposit is protected using an ‘insured’ scheme, the landlord must give it to the TDP scheme. They will hold it until the issue is settled.

Inventories and Schedules of Condition

Having an inventory and schedule of condition at the start of a tenancy, although not mandatory, makes any claim for damages against the deposit much easier to establish as they will be taken as the measure of the state of the property and the landlord’s fixtures and fittings at the start of the tenancy.

Categories: Residential Lettings Best Practice