Tenancy Agreement

Tenancy Deposit Scheme

From 6 April 2007, when you pay a tenancy deposit for an assured shorthold tenancy, the landlord or letting agent must protect your deposit through a Government-backed tenancy deposit scheme. This is a legal requirement.

Why have the Tenancy Deposit Scheme been introduced?

The Government has introduced the scheme to protect tenancy deposits and provide a fairer system for settling disputes about the return of a deposit at the end of a tenancy. Before introduction of these schemes, there were many disputes about whether the landlord kept the dispute unfairly or not. With the this scheme, an independent service helps to resolve disputes about deposits at the end of a tenancy. This service is free for tenants.

What does the landlord or agent have to do?

After a tenant has paid the deposit, the landlord or agent must then protect the tenant’s deposit using a tenancy deposit scheme with in 30 days of receiving it. There are two types of scheme available:

  • A custodial scheme, where the landlord or agent pays the deposit to the scheme, which will keep it until the end of your tenancy.
  • An insurance scheme, where the landlord or agent keeps the deposit but pays insurance premiums to the scheme. This means that the deposit is insured if there is any dispute, and the scheme will repay the tenant the agreed amount directly. The insurance scheme can charge fees to landlords for membership and can require contributions towards the costs of insurance.

It will be up to the landlord or agent to decide what scheme to use.

Prescribed information relating the protection of the deposit must also be served to the tenant within 30 days of receiving the deposit. This information includes:

  • the landlord or agent’s contact details
  • which tenancy deposit scheme is being used and the contact details for the scheme
  • information about the purpose of a tenancy deposit
  • how the tenant can apply to get the deposit back at the end of the tenancy
  • what the tenant should do if there is a dispute about the deposit
  • any prescribed information that is supplied by the scheme e.g. informational packs

The scheme you choose should have a downloadable form, which provides all the necessarily information that you need to serve to your tenant. Just download the form (it should be referenced as “Prescribed Information”) from the scheme’s website, complete it, and serve it to your tenant. That should keep you in good standing with your legal obligations.

What if the landlord or agent doesn’t provide the Prescribed Information or hasn’t protected the tenant’s deposit?

In this case, the tenant can apply to the county court for an order that the landlord or agent should pay the deposit back, or protect it in one of the tenancy deposit protection schemes.

The court can also order the landlord or agent to pay compensation equivalent to three times the value of the deposit you paid.

What happens at the end of the tenancy?

At the end of the tenancy, if the landlord/letting agent agree on how much of the deposit should be returned, the tenant should get his/her deposit back within 10 days of agreeing.

If the deposit was held in a custodial scheme, the tenant will also receive some interest on the deposit. The custodial scheme will repay tenants direct, either by cheque or by electronic transfer. Deposits held in the insurance-based schemes will be repaid by the landlord either in cash or by cheque, as they choose. Deposits held in the insurance-based schemes will not pass on any interest to the tenant.

Government approved Deposit Schemes