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An introduction to deposit protection schemes

Deposits have been a cause of potential conflict between landlords and tenants for years, with tenants often losing out, so the introduction of compulsory schemes designed to protect deposits by the government is a beneficial move for all concerned.

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Tenants and landlords should be aware of the following points.

A deposit, usually paid before the first day of the tenancy, is normally one month of rent, but sometimes it can be more. It is held to cover any unexpected costs at the end of the tenancy.

It’s a legal requirement for landlords to put deposits for all shorthold tenancies starting after 6th April 2007 into a deposit scheme. There are three available: Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme. Letting agents can do this for landlords. The government site describes landlord responsibilities clearly.

Deposits only become applicable when the rental agreement is signed. It still applies if it’s paid for by someone other than the tenant, but if a landlord is living in the same property, it does not. Although it’s not a requirement, it’s a good idea to have an inventory created. Property inventory software from companies such as can help.


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Custodial vs insurance schemes

There are two types of schemes. In custodial arrangements, the landlord submits the deposit for the length of the tenancy, and it is only released when an agreement has been made at the end regarding how much is to be returned. With insurance, the landlord pays to insure the deposit and has to repay the tenant once the tenancy ends. If they don’t, the insurance will pay the tenant and pursue the landlord.

It is the landlord or agent’s responsibility to register the deposit within 30 days of the agreement being signed. Tenants must be informed where their deposit is, along with details about any potential reasons for it to be withheld.

As long as the property is returned in a good state – it does not have to be in the same condition as it was at the beginning – and all bills are up-to-date, tenants should receive their full deposit back.

If an agreement can’t be reached over any amounts due, the resolution service provided by the deposit scheme can intervene.

In Scotland, schemes are retrospective, so any deposits taken before July 2012 must be protected.


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