Tenancy Deposit Protection

The Tenancy Deposit Protection applies to all assured shorthold tenancies in England and Wales where a deposit is taken. Virtually all new contracts to let a property are assured shorthold tenancies.

Tenancy Deposit Protection has been introduced:

To ensure good practice in deposit handling, so that when a tenant pays a deposit, and is entitled to get it back, they can be assured that this will happen.

To assist with the resolution of disputes by having an Alternative Dispute Resolution (ADR) service.

It will also encourage tenants and landlords to have in place, from the outset, clear agreement on the condition of the property through best practice, such as the use of inventories, and agreement on the condition of the property.

Landlords will be able to choose between two types of scheme: a single custodial scheme and two insurance-based schemes.

Custodial scheme

The tenant pays the deposit to the landlord or agent who then pays the deposit into the scheme.

Within 14 days of receiving a deposit, the landlord or agent must give the tenant the prescribed information (to be set out in secondary legislation) about the scheme being used and the tenancy.

At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties.

If there is a dispute, the scheme will hold the amount until the dispute resolution service or courts decide what is fair. The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will used to offer interest to the tenant, or the landlord depending on the terms of the tenancy agreement.

Insurance-based schemes

The tenant pays the deposit to the landlord or agent who retains it and pays a premium to the insurer - the key difference to the custodial scheme.

Within 14 days of receiving a deposit, the landlord or agent must give the tenant prescribed information about the scheme being used and the tenancy.

At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord or agent returns all or some of the deposit.

If there is a dispute, the landlord or agent must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.

If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.

Don't leave it to chance.

Inventories are an essential piece of documentation. The inventory of contents and schedule of condition is prepared to avoid any misunderstanding at the end of the tenancy. Without such safeguards it will be impossible for the Alternative Dispute Resolution (ADR) service to determine any loss or damage to the property or its contents.

Tenancy Deposit Scheme

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