Protecting a Tenancy Deposit
Protecting a tenancy deposit within 30 days of taking it is now a crucial part of letting; otherwise you could be stuck with a bad tenant you can’t evict.
If you are using an assured shorthold tenancy (AST), which almost all residential tenancies in England and Wales do (the default tenancy), and if you take any form of deposit – defined as any monies held for security to be returned or withheld – then it MUST be protected within 30 days of receiving it.
You must also, within 30 days, do the following:
- Serve on your tenant/s a correctly worded statutory notice
- Serve the deposit scheme information leaflet
- Make sure the statutory notice refers to the clause in your tenancy agreement which explains under what circumstances the deposit can be withheld
- Get proof of service for these notices.
Fail to do any of these, and you are stymied if you need to evict.
The deposit must be protected in a government-backed tenancy deposit scheme (TDP). In England and Wales the deposit can be registered with:
- Deposit Protection Service (Custodial and Insured)
- MyDeposits - including deposits that were held by Capita
- Tenancy Deposit Scheme (Custodial and Insured)
With tenancies that are NOT assured shortholds, you don’t need to protect the deposit and you can even accept valuable items (e.g. a car or watch) as a deposit instead of money, but these items cannot be protected by a scheme.
Providing the tenancy agreement says so, and it is important to point this out in the statutory information you serve on your tenant, landlords can withhold deposits if:
- The tenant fails to meet the terms of the tenancy agreement
- Does damage to the property
- Fails to pay rent or bills
At the end of a tenancy you must return the deposit within 10 days of you both agreeing how much is to be refunded. If you’re in dispute, then the deposit will be protected in the TDP scheme until the issue is sorted out.Information landlords must give to tenants
Once you received the deposit, you have 30 days to tell your tenant/s:
- the address of the rented property
- how much deposit you’ve taken
- how the deposit is protected
- the name and contact details of the tenancy deposit protection (TDP) scheme and its dispute resolution service
- yours (or the letting agency’s) name and contact details
- the name and contact details of any third party that’s paid the deposit
- why you would keep some or all of the deposit – refer to the clause in your tenancy agreement
- how the tenant applies to get the deposit back
- what the tenant should do if they can’t get hold of the landlord at the end of the tenancy
- what the tenant must do if there’s a dispute over the deposit.
Where a third party (parent, guarantor or local authority for example) pays part or all of the deposit directly to the landlord or agent, the deposit must be protected and they must also be served the information as above.
All the tenancy deposit protection (TDP) schemes offer a free dispute resolution service, which you can use if you or your tenant disagree about how much deposit should be returned.
You don’t have to use the free dispute resolution service (you can use the county court if you prefer, but then there are court fees involved) but if you do, both landlord and tenant have to agree to it. You’ll both be asked to provide evidence, and the decision made about your deposit will be final, there is no appeal.
Landlords do not have to protect a holding deposit (money paid to ‘hold’ a property before an agreement is signed). Once the tenancy is set-up the holding deposit becomes part of the deposit, which must then be protected.
With protected deposits good inventories are more important than ever. Without documentary evidence of the condition of the accommodation at the start and end of the tenancy, you will not stand a chance of winning a deposit dispute. It is always best to use an independent inventory service.
We recommend Tom Derrett’s book – How to Win Deposit Disputes