Tenancy Deposit Schemes

By Law, all Deposits must be registered.

All new tenancy deposits must be protected in a government-authorised scheme. This new rule applies if the tenancy is an assured shorthold tenancy. The Government wants to make sure tenants’ deposits are protected so that:

• Tenants get all or part of their deposit back, when they are entitled to it.
• Any disputes between tenants and landlords or agents will be easier to resolve.
• Tenants are encouraged to look after the property they are renting.

At the end of the tenancy, following adequate written notice, a landlord or agent can seek possession of the property. A tenant who refuses to leave cannot be evicted without a court possession order.A landlord or agent will lose their automatic right to regain possession of the property at the end of the tenancy unless they have protected the deposit in a scheme and given the tenant information about how it is protected.

What are Tenancy Deposit Schemes?

There are two types of tenancy deposit protection scheme available for landlords and letting agents (insurance-based schemes and custodial schemes). All schemes provide a free dispute resolution service.

The schemes allow tenants to get all or part of their deposit back when they are entitled to it and encourage tenants and landlords to make a clear agreement from the start on the condition of the property.

The schemes:

allow tenants to get all or part of their deposit back when they are entitled to it
make any disputes easier to resolve
encourage tenants and landlords to make a clear agreement from the start on the condition of the property

There are two types of tenancy deposit protection scheme available for landlords and letting agents. All schemes provide a free dispute resolution service.

Insurance-based schemes

the tenant pays the deposit to the landlord
the landlord retains the deposit 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 the details about how their deposit is protected including:

the contact details of the tenancy deposit scheme selected
the landlord or agent’s contact details
how to apply for the release of the deposit
information explaining the purpose of the deposit
what to do if there is a dispute about the deposit

At the end of the tenancy:

if an agreement is reached about how the deposit should be divided, the landlord or agent returns all or some of the deposit
if there is a dispute, the landlord 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

Custodial schemes

the tenant pays the deposit to the landlord or agent
the landlord or agent then pays the deposit into the scheme

Within 14 days of receiving a deposit

The landlord or agent must give the tenant the details about how their deposit is protected including:

the contact details of the tenancy deposit scheme selected
the landlord or agent’s contact details
how to apply for the release of the deposit
information explaining the purpose of the deposit
what to do if there is a dispute about the deposit

At the end of the tenancy:

if an agreement is reached about how the deposit should be divided, the scheme will return the deposit, divided in the way agreed by both parties
if there is a dispute, the scheme will hold the deposit until the dispute resolution service or courts decide what is fair.

Moving in

At the beginning of a new tenancy agreement, the tenant pays the deposit to the landlord or agent as usual, who must ensure it is protected.

1. There is a custodial scheme.
Where the money is held by the scheme until the end of the tenancy. The landlord or agent simply puts the deposit into the scheme at the beginning of the tenancy. This is the service Munrolock uses.

2. Insurance-based schemes
Under the insurance schemes the landlord keeps the deposit, and pays the insurance scheme to insure against the landlord failing to repay the tenant any money due to him. There is a choice of two insurance-based schemes.

Within 14 days of taking the deposit, the landlord or agent must provide the tenant
with details of how the deposit is being protected including:

• The contact details of the tenancy deposit scheme selected
• The landlord or agent’s contact details
• How to apply for the release of the deposit
• Information explaining the purpose of the deposit
• What to do if there is a dispute about the deposit

Tenants have a responsibility to return the property in the same condition they took it on.

Moving out

At the end of tenancy the condition and contents of the property should be checked against the agreement made at the start of the tenancy. The landlord or agent then agrees with the tenant how much of the deposit will be returned to them. Within 10 days the agreed amount of the deposit will be returned to the tenant.