As a landlord, your deposit protection scheme should be at the forefront of your consideration if you rent out residential property in England and Wales. Mandatory by law, these schemes have been put in place to ensure that you and the tenant are equally protected by certain requirements when a deposit is agreed upon.

During the term of the tenancy, this deposit can be held by you as the landlord to cover any non-payment of damage, rent, breakages, or cleaning during the tenancy period. Deposit protection has been a legal obligation on assured shorthold tenancies since April 2007.

Below we will provide a detailed outline of all you need to know as a landlord about deposit protection.

Obligated by law

Under UK law, any landlord letting property under an assured shorthold tenancy must place any deposit they receive in one of the three schemes available in England and Wales.

There are three government-approved tenancy deposit schemes to choose from, and they are as follows:

  • Deposit Protection Service (Custodial and Insured)
  • Tenancy Deposit Scheme (TDS)
  • My Deposits 

All tenancy deposit schemes will offer you either an insured or custodial protection scheme depending on whether you want the scheme to hold your deposit without any additional costs, or if you are willing to pay the scheme for your deposit to be insured.

It is the responsibility of you or your letting agent to put your tenants’ deposit in the chosen scheme within 30 days of getting it, otherwise you could find yourself in a vulnerable position, facing consequences such as: 

  • Your tenant will have a defence to any claim made by you for rent arrears.
  • Your tenant could claim three times the deposit amount in addition to the return of the deposit as recompense for your failings.
  • You cannot serve a valid Section 21 notice under Section 215 of the Housing Act 2004, with the only resolution available being that the deposit is returned to the tenant in full, or deduced as agreed between both parties, or to make a successful application to your country court under Section 214(1).

Procedure once the policy is protected

Once secured, it’s recommended that your tenant receives copies of any leaflets provided by the scheme which will contain relevant information regarding how it works.

This information will be imperative to the tenant/s since this is recognised as a legal requirement and failure to comply could lead to prosecution. 

Process for making deductions

Certain deductions can be made from the deposit when the tenant fails to uphold their duties as was stipulated in the tenancy agreement.

Examples of these deductions are as follows:

Missing items and damaged property

If you have reason to believe that an item has been damaged or have gone missing, then you can deduct money for the replacement. While your tenant is still occupying the residence and its contents suffer damage, then it is the tenants’ responsibility to repair or replace the affected area/item.

If it falls to you for the replacement at the tenant/s request, then you must present a receipt or estimate for items to your tenant/s if they request it before you make any deductions. The replacement of items due to normal wear and tear must be replaced by you, and deductions from the tenants’ deposit may not be made.

Unpaid or outstanding rent

You are within your rights to deduct any unpaid monies from your security deposit if your tenant leaves whilst owing you rent or maintenance costs. You can also begin court proceedings to recoup the remainder amount in excess of the security deposit that you hold from your former renter.

Cleaning deductions

If it was agreed upon that the tenant cleans the property before they vacate, but fails to do so, then you may deduct money for doing it for them.

The role of the deposit scheme at the end of the tenancy

An agreement will be reached about how the deposit will be returned, which the deposit scheme will follow through on. In the event of a dispute, your deposit scheme should be notified immediately as they will then hold the deposit until the courts, or their dispute resolution service decide on fair proceedings.

You can find out more about deposit protection schemes and your responsibilities as a landlord – from what information you need to provide your tenants with, to what happens if you don’t adequately protect their deposits – by clicking on the gov.uk page here.

For more information on how we can assist you on your letting journey, get in contact with our team at Key Property Consultants, where we provide a free and instant online valuation to see how much rent you could be charging in the current marketplace.

We are based in Penge and Welling, covering the whole of South East London and Kent.

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