Deposit Protection schemes
This guide aims to give you all the information about Rental Deposit Protection Schemes.

Last updated: 23/07/2020 | Estimated Reading Time: 6 minutes

Deposit protection schemes

Deposit protection schemes can be a great way to get reassurance as a tenant. The schemes are government backed and if you are renting, you will certainly be benefitting from one already. The schemes are designed to make sure that tenants receive their deposit back in full unless they have caused damage, fallen behind on rent or in some other way violated the tenancy agreement.

These kinds of schemes have been referred to in different ways such as deposit protection services, rent deposit schemes and landlord deposit schemes. All these terms, and a few more, all refer to the same thing - a plan put in place by government to govern the way in which tenancy deposits are handled.

These schemes are crucial to securing the confidence of both tenant and landlord in the fact that their managing of the deposit is being done in a fair and above board manner.

This guide will talk you through everything that you need to know about deposit protection schemes and we'll explain the ins and outs of what to do in the case of a dispute with your tenant or landlord.

In This Guide:

Why are deposit protection schemes important?

Deposit protection schemes are a valuable system for anybody who is either living in rented accommodation or renting out a property to tenants. These schemes are important because of the security that they give people and because of the trust that they allow to develop between tenant and landlord.

Renting is a growing phenomenon in Great Britain. At the beginning of 2015 at least half of the households in London were living in rented properties. This is unlikely to change any time soon, with an economic recovery still happening and limited space in which to build new property. This means that as a result less and less people can afford to buy their own property and are looking to rent instead.

Renting a property from a complete stranger requires quite a large amount of trust due to the amount of money and property involved. This means that deposits are all the more important to building up reassurance for both sides of the agreement.

A deposit is a sum of money that a tenant places into the keeping of the landlord. It is designed to act as a safeguard against any late rental payments or any damages to the rented accommodation. If any of these things do happen, the landlord can then take the relevant amount of money out of the deposited sum.

One problem with this system however, is who decides what the relevant amount is? In some cases it can be fairly straight forwards - if somebody has missed a rent payment etc. But in others there can often be no clear right answer to how much of the deposit should be taken and how much should be returned to the tenant.

Before the introduction of deposit protection schemes, there were many cases in which tenants were left feeling as if they had been ripped off by their landlord. If this was the case, then there was often very little that they could do about it without having to partake in a very lengthy process to resolve the dispute.

It was for reasons like this that deposit protection schemes were introduced. They were first put into law in the Housing Act 2004 and were first put into practice in April 2007. This new piece of legislation made it a legal requirement for any landlord to put any deposits from any tenants into a deposit protection scheme.

What do landlords need to know about deposit protection schemes?

Landlords are now legally required to place any deposits that they receive from tenants into a deposit protection scheme within 30 days of receiving the payment. The landlord must also provide the tenant with proof that they have done so.

One thing that this type of deposit must not be confused with is a holding deposit. Holding deposits are often required from people who have declared an interest in the property but have not yet become a tenant in full. These types of deposit do not need to be placed into the deposit protection scheme, this is because they are only in place to secure the landlord against the potential tenants pulling out of the deal.

Once the tenancy period has come to an end, the money from the tenancy deposit scheme must be returned to the tenant. In order for a deduction to be made, a reduced sum must be agreed upon by both the tenant and the landlord. If there are no disputes about how much of the deposit should be returned, the sum should be returned no more than 10 days after.

Disputes over your deposit

Once a tenancy comes to end the deposit must either be returned in full or a deduction amount must be agreed upon by both the tenant and the landlord. However it is not uncommon for disputes to develop between the two parties involved when they do not agree on how much should be taken from the original sum of money.

These disputes normally come down to disagreements over the amount being kept by the landlord or over the reason that the landlord thinks that they are entitled to keep the amount. Before deposit protection schemes were introduced, the landlord would be in complete control of this situation because the money from the deposit would be in their hands. This meant that they had complete autonomy over whether or not they would return any of it.

Deposit protection schemes were developed to with precisely these types of situation. Each scheme has a dispute resolution service that is designed to help the two parties come to a fair and sound agreement over how much is owed by the tenant and if the reason for the withheld sum is legitimate.

What do tenants need to know about deposit protection schemes?

Once you have given your deposit over to your landlord they must provide you with information on what scheme your money has been placed into. They are legally required to supply this to you within one month of you moving into the property.

Your landlord must also give you information about the deposited sum and what form of protection it has. They should also give you their personal information such as their address or the one of any housing agent that they operate through. They should also inform you of any reasons that they believe would warrant the withholding of part or all of the deposit and what you should do if you dispute their claim.