How Do I Deal with the Tenancy Deposit?

A Tenancy Deposit is a refundable payment that the landlord may ask a tenant to pay in case of any breach of the tenancy agreement (such as damage or unpaid rent or bills) at the end of the tenancy. The landlord is not legally required to take a deposit.

Any deposit taken must be protected in a Government backed tenancy deposit schemes within 30 days of taking the payment. The landlord must provide the tenant with information as to where and how their deposit is protected. The deposit is the tenant’s money and the landlord will need to provide evidence to substantiate any proposed deductions from the deposit.

These government-backed schemes ensure your tenants will get their deposit back if they:

  • meet the terms of your tenancy agreement
  • don’t damage the property
  • pay the rent and bills

Tenancy Deposit Protection Schemes

You can use any of the following schemes if your property is in England or Wales:

There are separate TDP schemes in Scotland and Northern Ireland.

All TDP schemes offer you 2 options:

  • the scheme hold the deposit for free - known as a ‘custodial’ scheme
  • you or the agent holds the deposit and you pay the scheme to insure it - known as an ‘insured’ scheme

At the End of the Tenancy

The deposit must be returned to your tenants within 10 days of you both agreeing how much they’ll get back.

If you’re in a dispute with your tenants

The deposit is protected in the scheme until the issue is settled.

If you’re in an ‘insured’ scheme, you or the agent must give the deposit to the TDP scheme. They will hold it until the issue is settled.

Holding deposits

If you’ve received a holding deposit from your future tenants (money to ‘hold’ a property before an agreement is signed), you don’t have to protect it. Once they become tenants the holding deposit becomes a deposit, and you must protect it.

Deposits made by a third party

You must use a TDP scheme even if the deposit is paid by someone else, like a rent deposit scheme or a tenant’s parents.

More help: Letting Your Property