As a landlord, you are responsible for a lot of things; including the tenancy agreement, legal documentation, and protecting the tenant’s deposit.
In his latest article, Landlord & Tenant Specialist Jason Grimster outlines how deposit protection works and your obligations.
What are the different types of tenancy deposit schemes?
When a landlord rents out a residential property under an Assured Shorthold Tenancy (AST) and a deposit is paid by the tenant, it must be placed in a government approved tenancy deposit scheme.
There are three approved schemes in which a deposit may be protected:
- My Deposits – mydeposits.co.uk
- Tenancy Deposit Scheme – tenancydepositscheme.com
- Deposit Protection Service – depositprotection.com
Related: What is an Assured Shorthold Tenancy and why do I need one?
Do I have to put my tenants deposit in a scheme?
As landlord, any deposit taken from a tenant has to be protected in an approved scheme.
If you don’t protect a tenant’s deposit or fail to notify a tenant of a deposit protection, there can be serious consequences for you and your tenant could make a claim for financial compensation.
Deposit protection is not the only obligation of a landlord. We’ve outlined your ‘Top 10’ most important responsibilities here.
How do I put my tenants deposit in a scheme?
You should contact one of the three deposit protection schemes. They will offer easy to follow guidelines which will help you to protect your tenant’s deposit. Most of the time, protection can be completed online.
Each approved scheme will offer a choice of either a:
- Custodial Scheme: Where the deposit stays with the scheme provider for the duration of the tenancy, or an
- Insured Scheme: Where the scheme provider issues insurance protection for the deposit.
How long can you hold a tenant's deposit?
A tenant’s deposit is held for the duration of the tenancy, and must be returned within 10 days of the tenancy ending.
You must also register the deposit with a registered scheme within 30 days of receiving it from the tenant.
If you are a new landlord, you might have some more questions such as the costs you’ll be liable to pay, the requirements for letting and more. Read our advice here.
Do landlords legally have to protect deposits?
Yes – landlords are legally obliged to protect a tenant’s deposit.
Failure to do so (and/or failure to notify a tenant of the protection) can lead to serious consequences for you.
In addition to protecting a tenant’s deposit, a landlord must also issue the most recent copy of the How to Rent guide to the tenant at the start of the tenancy. Find out more about the guide and your obligations here.
What is the penalty for not protecting the tenant's deposit?
Compensation will be payable by a landlord who either fails to protect a deposit and/or fails to provide the necessary information to a tenant once a deposit is protected.
Payment can be up to three times the deposit plus the return of the deposit itself, so deposit protection is certainly important for landlords.
Can I be sued for not protecting a deposit?
Yes - your tenant may bring a claim under Section 213 of the Housing Act 2004.
How to mitigate deposit protection claims
As a landlord, the best way to protect yourself against a claim is to make sure that any deposit collected from a tenant is protected in one of the three approved schemes and that the necessary information is given to the tenant.
Only then will you be fully protected against a claim.
Should you, for whatever reason, not protect a deposit as soon as it is received, then it should be protected as soon as possible and the relevant information given to the tenant.
On what grounds can I withhold my tenant’s deposit?
Once protected, a deposit may be held against a range of losses covered under the tenancy.
Individual tenancies will often set out clearly in what circumstances a tenant’s deposit may be withheld or have deductions made.
Can I use my tenant’s deposit for unpaid rent?
Yes – unpaid rent, also known as rent arrears, is often the main reason a deduction may be claimed from a deposit.
A tenancy will often make specific mention of this as an agreed reason for such deductions.
Can I take from a tenant’s deposit if they damage the property?
Second to rent arrears, property damage, beyond the usual wear and tear, is one of the most frequently used reasons for a landlord to withhold a tenant’s deposit.
As well as withholding a deposit, both property damage and rent arrears are grounds for eviction under Section 8 of the Housing Act. Read how Section 8 evictions work here.
Eviction is also currently possible under Section 21, which does not require a landlord to provide a reason or adhere to any grounds to evict a tenant. However, Section 21 is set to be abolished under the Renter’s Reform Bill. Find out more here.
Related: How to get ready for a new tenant
Specialist Landlord Advice
If, after reading this article, you have any more questions or would like to speak to a specialist; please don’t hesitate to contact our Landlord & Tenant Team.
We can provide tailored advice specific to your circumstances, assist you in protecting or withholding a deposit and help resolve any dispute or eviction.
You can call us on 01202 499255, or fill out the form at the top of this page, for a free 30-minute appointment.
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