Tenancy Deposit Schemes

Tenancy Deposit Schemes

The Tenancy Deposit Scheme came into force on 6th April 2007.   There are serious financial penalties if a landlord fails to protect a tenant’s deposit or fails to provide certain information to the tenant in accordance with the legislation.

The Tenancy Deposit Scheme was introduced to ensure that deposits paid by tenants were protected, firstly, to ensure tenants got all or part of their deposit back when they were entitled to receive it, secondly, if a dispute does arise between a landlord and tenant such disputes would be easier to resolve and, thirdly, to encourage tenants to look after property they are renting.

In practice the new Tenancy Deposit Scheme means that when a tenant pays his or her deposit to a landlord or letting agent the deposit must be protected in an approved tenancy deposit scheme, run by one of three 3 approved scheme providers.

There are two types of tenancy deposit protection scheme available:

  1. The Custodial Scheme  – this  scheme is  free to use scheme and the deposit money is held   within the scheme until it is time for it to be repaid at the end of the tenancy.
  2. Insurance backed schemes – under this scheme the landlord keeps the deposit and pays an insurance premium to an insurance backed scheme which insures against a landlord failing to repay to the tenant any money that is due to him or her.  There are currently 2 approved insurance schemes, and  there is a charge for the use of this scheme.

The legislation clearly states that within 14 days of the deposit being paid by the tenant the landlord must  provide the tenant with required details of how the deposit is being protected.

At the end of the tenancy the landlord and the tenant agree how much of the deposit is to be returned to the tenant and the deposit must be returned.

Whichever tenancy deposit protection scheme is used, in the event of a dispute there is a free dispute resolution service.

The legislation in respect of Tenancy Deposit Schemes is complex and a required procedure must be followed to ensure compliance with the legislation, please speak further to the property team at Hand Morgan & Owen who will be able to advise you  further.

24 November 2008


The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)