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Deposit protection scheme guide

Moving to a new rental home? Here are the laws around your deposit and how your landlord must keep it safe it with a government deposit protection scheme.

Words by: Ellie Isaac

Senior Editor

If you rent your home, your landlord usually has to keep your deposit safe by using one of the government's deposit protection schemes.

Here's everything you need to know about deposits when you rent a home and the protection schemes that keep your money safe.

What is a deposit?

A deposit is typically the equivalent of up to a month's rent and has been capped at five weeks rent since 2019.

You give your landlord a deposit to protect them against any breaches of your tenancy agreement. This includes damage to the property, additional cleaning or covering unpaid bills once you've moved out.

While you're in the rental home, the deposit remains your property. And it should always be returned at the end of the tenancy, provided you have stuck to the rental agreement.

It is not law to have an inventory to use a deposit protection scheme, but it is good practice.

An inventory documents the condition of the property and its contents at the start of a tenancy. It's very helpful if there's a dispute at the end of a tenancy.

The inventory should be signed by both landlord and tenant. If you do not use an inventory, take photographs of the property inside and out at the start of a tenancy to keep a record.

You should also check your rental contract for the circumstances in which the landlord can make a claim on your deposit.

How to understand your rental contract

How does a deposit protection scheme work?

In the past, a landlord was able to withhold an entire deposit at the end of a tenancy if they were in dispute with the tenant.

In rare cases, this could lead to unscrupulous landlords taking advantage of honest tenants.

So the government introduced tenancy deposit protection in 2007 in a bid to regulate the system.

As a result, a landlord must protect their tenant’s deposit using an approved deposit protection scheme.

This applies to the large majority of tenants who rent a property on an Assured Shorthold Tenancy after 6 April 2007.

These conditions do not apply in some cases, such as when a landlord lives in the property with the tenant, or if the tenant lives in student halls of residence. However, it is still regarded good practice to ensure deposits are protected.

What are the 3 deposit protection schemes?

There are 3 government-backed deposit protection schemes operating in England and Wales:

The schemes aim to help safeguard deposits and provide an even and effective means of resolving disputes between the landlord and tenant.

They also hope to promote greater understanding between both parties at the start of a tenancy.

Make sure your landlord is using one of these 3 schemes if you live in England or Wales. If any other scheme is used, then your deposit is not protected by law.

There are separate tenancy deposit protection schemes in Scotland and Northern Ireland.

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What types of deposit protection schemes are there?

All 3 of the government-backed tenancy deposit protection schemes offer custodial and insurance-based options.

1. Custodial 

The custodial option is where the landlord lodges the deposit with the scheme for the duration of the tenancy.

The money is then released when both the landlord and tenant agree on the total sum to be returned at the end of the tenancy.

The custodial option is free for landlords to use because it is funded by interest made on the deposit.

Landlords based overseas must use the custodial format unless they employ a British-registered letting agent to manage their tenancy.

2. Insurance 

The insurance option is where the landlord holds the tenant's deposit throughout the tenancy and pays the scheme a fee to have it protected.

The landlord manages the repayment at the end of the tenancy.

If the landlord does not pay the tenant the amount they are owed, then the scheme will pay the tenant and try to get the money back from the landlord.

What happens at the start of a tenancy?

As a tenant, you might pay a holding deposit before you sign a rental agreement. This reserves the property for you, but landlords are not required to protect it until you become a tenant.

Since June 2019, the holding deposit can be no more than one week's rent.

Once you sign a rental agreement, you pay the main deposit, which is usually called either your tenancy or security deposit. This must be protected with a scheme.

The landlord might put your holding deposit towards the tenancy deposit.

Landlords (or their letting agent) must put the deposit in one of the protection schemes within 30 days of receiving it.

The landlord can choose which deposit protection scheme they use and they have to inform you which one it is.

Landlords are still required to use a protection scheme even if your deposit is paid by a third party, such as your parents or guarantor.

Within 30 days of receiving a deposit, landlords must provide you with:

  • address of the rented property

  • deposit amount paid

  • how the deposit is protected

  • name and contact details of the deposit protection scheme and its dispute resolution service

  • landlord or letting agent’s name and contact details

  • name and contact details of any third party that has paid the deposit

  • why they would keep some or all of the deposit

  • how to apply to get the deposit back

  • what to do if a tenant cannot get hold of the landlord at the end of the tenancy

  • what to do if there is a dispute over the deposit

If you do not receive this information within 30 days, follow up with your letting agent or landlord.

How long is the deposit protection scheme valid for?

Your deposit is protected for the duration of your tenancy with the same landlord. It will remain protected if you decide to renew your tenancy.

If you decide to leave the property before the end of the tenancy, you remain legally contracted until termination of the tenancy agreement is agreed with the landlord. An adjudicator requires evidence that the tenancy has ended.

What happens if a landlord is suspected of not using a deposit protection scheme?

If you believe your landlord has not used a deposit protection scheme when they should have done, you can apply to the local county court at any time during the tenancy.

Inform the landlord first to give them the opportunity to protect your deposit with a scheme.

You should get legal advice if you feel you need to apply to court.

The court has the power to order the landlord to repay the deposit to you or put it into a custodial tenancy deposit protection scheme bank account within 14 days.

The court can also order a landlord to repay you up to three times the original deposit as a fine within a fortnight.

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What happens at the end of a tenancy?

As a tenant, you should be told how much of your deposit is going to be returned to you within 10 days of the end of the tenancy.

The deposit is normally paid into your bank account. 

The government-backed schemes mean that you will get your deposit back based on the following conditions:

  • the terms of the tenancy agreement are met

  • there is no damage done to the property or contents

  • the rent and bills are paid

Solving a dispute

Each deposit protection scheme offers a dispute resolution service, known as Alternative Dispute Resolution.

The service can be used if you and the landlord are in disagreement about how much deposit should be returned at the end of a tenancy. It is a free service and is intended to resolve disagreements without the need to go to court.

There may be a time limit on when a dispute must be registered by. Landlords and tenants are advised to contact the tenancy deposit protection scheme as soon as possible.

Cleaning charges and general wear and tear are among the more common reasons for deposit disputes. The government defines the phrase as "reasonable use of the premises by the tenant and the ordinary operation of natural forces".

It is a legal principle too that you should not bear the full cost of having any part of a property, or any fixture or fitting, put back to the condition it was at the start of the tenancy agreement.

The dispute resolution service differs slightly, depending on which scheme the deposit is held in. However, the overarching principles remain the same.

The service can only be used if both you and your landlord agree to use it and accept the ultimate decision made.

If a dispute arises, you and the landlord are both required to provide evidence to an impartial and qualified adjudicator within the required timescale.

Adjudicators can be individuals hired under contract to the deposit protection scheme or employed directly by the scheme.

Both you and the landlord should try to see the evidence from the independent third party or adjudicator's perspective. How will they view a case?

Types of evidence can include:

  • tenancy agreement

  • inventory

  • photo or video evidence

  • invoices, receipts and quotes

  • bank statements

  • utility bills and council tax

  • witness statements

You and the landlord are not required to meet during the process, and the adjudicator will not visit the property in question. The adjudicator will decide the final outcome. 

The adjudicator will consider a number of factors, likely to include:

  • length of tenancy

  • number and age of tenants

  • quality and condition of property and/or fixtures and fittings

  • wear and tear of property and/or fixtures and fittings or damage

The onus is on the landlord to show that he or she has a justifiable claim to retain all or part of the deposit, as the money remains your property.

If you or the landlord don't agree to use the dispute resolution service, court action may be required.

Landlords are responsible for making sure the deposit is kept safe with one of the schemes even if they use a letting agent to look after the deposit, which provides you with peace of mind.

It's worth taking the time to explore the different schemes available and see which is best, considering the property, the rental agreement and the landlord's own situation, to make the right choice.

You can get further help and advice from: 

We try to make sure that the information here is accurate at the time of publishing. But the property market moves fast and some information may now be out of date. Zoopla Property Group accepts no responsibility or liability for any decisions you make based on the information provided.