Do I Need to Protect A Tenants Deposit?
If the property is let using an AST then It is a landlords legal responsibility to secure a tenants deposit in one of the three government-backed tenancy deposit schemes:
- Deposit Protection Service
- MyDeposits
- Tenancy Deposit Scheme
For the latest information visit the gov.uk website.
The Process For Securing a Tenants Deposit
- Create an account with one of the three TDP’s above
- Receive a tenants deposit – This can be a maximum of 5 weeks rent
- Secure the deposit with the TDP you signed up with – If you visit the website of your TDP it will guide you through how to do this, or you can get in touch with them for further guidance.
- Provide the tenant with the prescribed information – Prescribed information can be generated from the website of your TDP once a deposit is secured. It to be provided to the tenant within 30 days of you receiving the deposit and they must sign and return a copy to you.
- Provide the tenant with the deposit certificate – This is generated and accesses through the website of your TDP when a deposit is secured, and must be provided to the tenant.
- Return the deposit to the tenant – The deposit must be returned to the tenant within 10 days of agreeing how much is to be returned.
Other Useful Information About Deposits
What happens if you don’t secure the deposit? – Failure to provide the tenant with the prescribed information and deposit certificate is punishable with fines. You may also find it difficult to evict a tenant unless they give you grounds for eviction. The tenant can make a claim against you and it is common for the tenant to be awarded 2x the deposit amount.
Is your property owned and operated by a limited company? – If yes, you are required to receive the deposit into a client account. A client account can be opened through your bank and you should contact them for their latest information. These accounts secure the deposit while it is in your possession before you protect it with a TDP.
Should you use an insured or custodial deposit protection scheme? – Either option is fine but they are different:
| Custodial | Insured |
| The money is kept by your TDP | You Keep the money (In a client account if using a Limited Company) |
| This scheme is free | There is a small fee for this scheme |
| Your TDP will earn interest on the money | You will earn interest on the money |
| The deposit is returned to the tenant by your TDP | You return the money to the tenant |
| Deductions to the deposit must be agreed by you and the tenant through your TDP | Deductions can be agreed without using your TDP |
| If a dispute involving the deducted amount arises it is reviewed by your TDP for free | If a dispute involving the deductions from the deposit arises then you must inform your TDP. |
| The disputed amount must be sent to your TDP who will review the dispute for free and return the money as they see appropriate. | |
| The non disputed amount of the deposit must be returned directly to the tenant. | |
Are holding deposits a good idea? – Holding deposits can be taken at the application stage of a new tenancy. They can be kept if an application falls through due to the tenant (Eg. they pull out of the application process and no longer what to move into the property). The holding deposit must be deducted from the tenancy deposit and the total tenancy deposit amount must be protected whit a TDP. You are not required to protect the holding deposit until it becomes the tenancy deposit.
Read our guide on Direct Debits
Using direct debits as a method of receiving rent is the best way to maintain cashflow. Our Direct Debits guide will help you make the right choice when setting up a direct debit.
Direct DebitsYou can also see all of our guides for landlords and much more in our Library.
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