A tenancy deposit scheme is set up for the protection of both tenant and landlord. As a landlord you are entitled to request a deposit from your tenant before they move in to a property you are letting which can be held against damage to the property, owed rent and unpaid bills.
The amount of deposit needs to be agreed with the tenant and is usually the equivalent to one month's rent; however, you can charge up to two months’.
Rather than being held by the individual, the government requires that the landlord places this money into a tenancy deposit protection scheme within 30 days of receipt.
If you do not use an approved tenancy deposit scheme
If you take a deposit from your tenant but do not protect it in an approved tenancy deposit scheme (and observe the requirements of the scheme), any no-fault eviction (section 21) notice you attempt to serve on your tenant will be deemed invalid. This means that you will only be able to reclaim your property using the far lengthier section 8 procedure.
This is also true of deposits taken prior to 6 April 2007 for tenancies that are still in effect (and have since become statutory periodic tenancies). The 23 June 2015 deadline to protect such deposits (which was extended to landlords by section 32 of the Deregulation Act 2015) has now passed.
Some ambiguity around periodic tenancies and deposit protection arose as a result of the Superstrike Ltd. Vs Rodrigues case in 2013, in which a high court ruled that a periodic tenancy is in effect a new tenancy, therefore necessitating the re-protection of the tenancy deposit. Section 32 of the Deregulation Act 2015, mentioned above, overruled this: now, if a deposit held in accordance with a periodic tenancy was protected within 30 days (or before 23 June 2015, in the case of deposits that were taken before 6 April 2007), and the landlord complied with the terms of the protection scheme as required, then they are treated as having complied with the scheme terms in respect of the periodic tenancy also.
Tenancy deposit return
At the end of a tenancy an agreement is reached between landlord and tenant as to the amount to be returned (if agreement is reached the funds must be returned within 10 days of the tenancy end date).
Tenancy deposit dispute
If a tenant enters into a dispute with you over the return of monies paid as a deposit the funds will be held by the tenancy deposit service until resolution is reached.
When you take a deposit you are required to use an approved scheme and to inform the tenant with the details of the scheme:
Tenancy deposit protection schemes: England and Wales
- Deposit Protection Service (DPS) www.depositprotection.com
A custodial scheme where deposits are secured in UK government-approved banks. The custodial scheme is free for use. From 1 April 2013, DPS has also offered an insurance-based scheme.
- My|Deposits www.mydeposits.co.uk
An insurance-based scheme whereby you keep hold of the deposit and pay a fee to insure its amount.
- Tenancy Deposit Scheme (TDS) www.thedisputeservice.co.uk
An insurance-based scheme open only to landlords that are members of an approved professional body.
For more details on tenant deposits and what to do if your tenant can't afford a deposit visit this page on the government's website.
Tenancy deposit protection schemes: Scotland
In the majority of cases the Tenancy Deposit Schemes (Scotland) Regulations 2011, which came into force on 7th March 2011, will need to be adhered to from this year. Landlords must pay their tenant's deposits into an approved scheme according to the following:
- Deposit received prior to 7 March 2011:
Where the tenancy is renewed by express agreement or tacit relocation on or after 2 October 2012 and before 2 April 2013 (Regulation 47(a))
Within 30 working days of renewal
In any other case (Regulation 47(b))
By 15 May 2013
- Deposit received on or after 7 March 2011 and before 2 July 2012 (Regulation 48) By 13 November 2012
- Deposit received on or after 2 July 2012 and before 2 October 2012 (Regulation 4) By 13 November 2012
- Deposit received on or after 2 October 2012 (Regulation 3)
Within 30 working days of the beginning of the tenancy
There are three free schemes available in Scotland:
- The Letting Protection Service Scotland http://www.lettingprotectionscotland.com/
- Safedeposits Scotland http://www.safedepositsscotland.com/
- My|deposits Scotland http://www.mydepositsscotland.co.uk/
What you need to do as a landlord
You should find out the following details from the TDP scheme provider:
- Name and contact details of the scheme
- Contact details for the scheme's dispute resolution service
- How to apply for the deposit's release
- What to do if you or your tenant cannot be contacted at the end of the tenancy
- How the deposit is protected
Within 30 days of receiving your tenants' deposit, you must give this information to your tenants:
- Address of the rented property and the amount of deposit paid
- Your name or your letting agency's name and contact details
- Name and contact details of any third party that has paid the deposit
- Items or services covered by the deposit
- Circumstances under which you will be able to retain some or all of the deposit
- What to do if there is a dispute over how much deposit should be returned