Everything a landlord wants to know about tenancy deposit protection but is afraid to ask

Stay one step ahead lawfully

As a landlord, you’re required by law to put a tenant’s deposit into a tenancy deposit protection scheme. There are some schemes available, covering both custodial and insured schemes. If you don’t offer tenancy deposit protection, you’ll be breaking the law and could be ordered to repay up to three times the amount of the deposit.

One of the many benefits of using a property management company is the ease of access to a tenancy deposit scheme. However, like all landlord obligations, if you want to do all the donkey work yourself it is perfectly possible to do so. In this post, I look at the musts and must-nots of tenancy deposit protection.

What’s the best type of tenancy deposit scheme?

There are two types of scheme available:

  • Custodial schemes are usually free of charge and is similar to locking your money away in an escrow account
  • Insured schemes allow you (or your representative) to retain the deposit while paying an insurance premium to protect it

What type of scheme is best for you depends on upon your personal situation, tenancy agreement in place and history of rentals. There are a number of organisations that offer tenancy protection schemes: if you’d like more details contact us and we’ll be pleased to provide further information.

The idea of a tenancy deposit protection scheme is to ensure that the tenant’s deposit is returned if the tenant hasn’t broken the tenancy agreement, hasn’t damaged your property, and has paid all bills and rent due.

When must the deposit be paid into a scheme?

As soon as possible, and in law within 30 days.

What does the landlord have to tell the tenant?

Once you’ve taken possession of the deposit, there are a number of things you have to tell the tenant (in writing). These include:

  • the amount of deposit paid how it is protected, including the name and contact details of the tenancy deposit protection scheme being used
  • your contact details (or your property manager’s details)
  • the conditions under which you might withhold some or all of the deposit paid
  • how the tenant can get their deposit repaid

You must inform the tenant of all these details within 30 days of receiving the deposit.

Holding and repaying deposits

Often, a tenant will pay a ‘holding deposit’. While this doesn’t have to be protected under the law, if it is then converted to the deposit proper (or part of it) the tenancy deposit protection rules kick in. These laws are also applicable if the deposit is paid by a third party and not by the tenant directly.

When the tenancy ends, you have to repay the deposit within ten days of agreeing how much will be repaid. If the amount can’t be agreed and a dispute arises, the deposit will remain in the scheme until a resolution is found (this might involve going to court, but is commonly handled through the tenancy deposit scheme’s dispute resolution service).

What’s the very worst that can happen?

Let’s say you have a nightmare tenant (it happens, especially if the tenant isn’t vetted comprehensively). You’ll want to get rid as soon as possible. Here’s the rub: if you haven’t protected their deposit correctly through a bonafide tenancy deposit scheme, you could find that a court allows the tenant to stay in your property.  Now that really will hurt.

The answer is simple: always make sure that the tenant’s deposit is properly protected.

Yours in effortless property management,

Arlene Alegre-Wood

P.S. If you’ve had a good or bad experience with a tenancy deposit protection scheme, or simply want more information, feel free to call us on +44 1522 503 717. Your story might help other landlords.

About the Author:

Arlene didn't start in property, she worked for the likes of Marks and Spencer, Harrods and her own consulting business in Food Technology. In 2009 she took over the chair of Ezytrac Property Group and has overseen its growth since then. Arlene conceived the famous 'Effortless Property' mantra and has been a big proponent of the constant push towards its achievement. Arlene is married to Brett, a fellow property expert and they have 4 kids.