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Tenancy Deposit & Protection Schemes

For many years it has been customary for landlords to take deposits from tenants. These were not payment of rent in advance, but money to be held as security against damage that tenants might cause to their properties or their contents, and against non-payment of rent or utility bills.

The idea was, and is, that if tenants fulfill their obligations, do not cause damage to their rental properties, and pay their rent in full, then the deposit will be paid back at the end of the tenancy.

Previously the matter of whether or not deposits should or would be repaid in full, or at all, was a matter left to be agreed between landlords and tenants. Sometimes they could not agree, when tenants would complain that landlords had unfairly kept their deposits when nothing had been done to warrant this. For their part tenants sometimes stopped paying rent in the last months of their tenancies, telling landlords to take the money out of their deposits.

The upshot was that legislation was introduced covering England and Wales (for the position in Scotland and Northern Ireland see below). And since 2007 it has been a requirement that any deposit taken as part of an assured shorthold tenancy agreement must be ‘protected’. That is to say it must be registered with one of three Government approved deposit protection schemes.

Not only that, landlords are required to give information to tenants about the way in which their deposit has been protected.

There are stringent penalties for failing to protect deposits, and also for failing to pass over the required information.

At the end of tenancies landlords may agree how the deposit will be used – paid back to the tenant with or without a deduction, or paid entirely to the landlord. If there is no agreement, the deposit will continue to be protected with the matter going to alternative dispute resolution provided as part of the deposit protection scheme.

It is important that landlords follow the rules in every respect since the penalties for lapses are considerable, and it is likely that any tenant in dispute with his or her landlord will look carefully for any technical or other failings that can be brought into the argument.

Detailed requirements

The requirement to protect deposits applies to Assured Shorthold Tenancies (ASTs), by far the most common form of tenancy agreement. (ASTs are the default type of tenancy for separate accommodation let to individuals after February 1997, but are not for use where the rent is more than £100,000 a year, for corporate or holiday lets, for lodging arrangements, or in a few other circumstances).

Holding deposits paid by a prospectice tenant to reserve a property before an agreement is signed are not covered by the protection requirement until the point at which an AST is signed and the holding deposit becomes a deposit.

Landlords must use a deposit protection scheme even if the deposit has been paid by someone other than the tenant.

Although the law introducing deposit protection came into force in 2007 it has already been amended – the principal effect being a change in the time limits specified for arranging protection and passing over the required information to tenants.

Landlords now have 30 days to protect deposits received and to provide the information required.

The legal position is that deposits remain the property of tenants even though they are handed over to a landlord or his or her representative for safe keeping for the duration of the tenancy. On receipt of a deposit landlords must use one of three approved schemes to protect the deposit.

One is a ‘custodial’ scheme in which the deposit is handed over to the scheme for safe keeping, the other two are insured schemed in which the landlord or his or her agent retain the deposit but pay an insurance premium by way of guarantee.

The three schemes, which are available online, are:

The Deposit Protection Service, a free to use custodial scheme available to all private landlords and letting agents. From 1 April 2013, The DPS will be launching an Insured Tenancy Deposit Protection Scheme alongside its current custodial scheme. Go to for more details.

MyDeposits, an insured scheme jointly owned by The National Landlords Association and Hamilton Fraser Insurance. Contact for more details.

Tenancy Deposit Scheme, which is run by The Dispute Service an independent, not-for-profit company, offers an insured deposit protection scheme, as well as a free custodial scheme. Go to for more information. TDS has developed DepositGuard for Landlord Knowledge Association members. Go to

Each of the schemes operates slightly differently and has its own documentation and scale of charges.

Required information

As well as protecting deposits, landlords must, also within 30 days, provide tenants with certain information. Included must be:

  • the address of the rented property;
  • how much deposit has been paid;
  • how the deposit is protected;
  • the name and contact details of the deposit protection scheme and its dispute resolution service;
  • the landlord’s name and contact details (or, if used, those of the letting agency);
  • the name and contact details of any third party who has paid the deposit;
  • why some or all of the deposit might be retained;
  • how to apply for return of the deposit; and
  • what to do should the landlord be unreachable at the end of the tenancy.

Much of this information will be provided by the chosen deposit protection scheme. But it is not enough to simply refer a tenant to the scheme or to any other source.


Penalties apply if deposit are not protected and also if the required information is not provided.

Landlords who do not protect the deposits they receive will be unable to obtain a Court Order for possession. If taken to court by a tenant who discovers that the deposit has not been protected, they will be required to return the deposit or lodge this with an authorised protection scheme, and may be instructed to pay the tenant up to three times the amount of the deposit.

Similar penalties apply for failure to provide the required information in full.

In the recent case of Ayannuga v Swindells the landlord had protected the deposit and provided some information within the 30 day time limit. He argued unsuccessfully that all the other information required could be obtained easily online from the deposit protection scheme. This was no excuse, said the court, ordering him to repay the deposit along with a penalty equal to three times the amount of the deposit.


Scotland introduced its own deposit protection in the form of the The Tenancy Deposit Schemes (Scotland) Regulations 2011. These regulations, effective as of November 2012, impose duties on landlords to pay the tenancy deposits they receive into an approved scheme and to provide information to tenants. about this to tenant, and to ensure that a deposit is held by an approved scheme throughout a tenancy.

For further information go to


Legislation has now been approved for tenancy deposit protection schemes to be introduced in Northern Ireland by early in 2013. Both custodial and insured schemes are to be approved with the requirement applying to new and renewed tenancies.