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Tenancy deposit protection schemes - when to use them

Tenancy deposit protection (TDP) schemes guarantee that tenants will get their deposits back at the end of the tenancy, if they meet the terms of the tenancy agreement and do not damage the property. Landlords must protect their tenants' deposits using a TDP scheme if they have let the property on an assured shorthold tenancy (AST) which started on or after 6 April 2007.

If these conditions don't apply - for example, because you live in the property with your tenant - you do not have to protect your tenants' deposits. However, it is still good practice to do so.

Landlords or agents must use one of the three approved TDP schemes to protect tenants' deposits where these conditions apply. If any other scheme is used, deposits are not protected in law. The three approved schemes are:

• Deposit Protection Service (DPS)
• MyDeposits
• Tenancy Deposit Scheme (TDS)

If you don't protect your tenants' deposits when required to, your tenants can take you to court and you may have to repay them their deposit plus between one and three times the amount of their deposit. You will also be unable to seek possession of your property in certain circumstances.

The schemes:

• encourage landlords and tenants to draw up clear tenancy agreements
• provide a free service to resolve disputes

TDP schemes do not cover holding deposits. Tenants can pay you holding deposits before they have signed a rental agreement. You are not required to protect a holding deposit with a scheme before someone becomes your tenant. However, once they are your tenant the holding deposit becomes a deposit which must be protected with a scheme.

• Deposit protection schemes for private tenants - problems and disputes

Protecting deposits by student tenants

If your tenants are students, you must protect their deposits using a TDP scheme if:

• they have an assured shorthold tenancy
• you received their full deposits on or after 6 April 2023

You must protect students' or any other tenants' deposits even if they were paid by someone else - for example, their parents.

Protecting deposits made by a third party

If a tenant's deposit is paid by someone else - eg through a rent deposit scheme - you still must use a TDP scheme.

You should ask the tenant and third party what relationship they are to each other and find out how much the third party wants to be involved in the process. For example, the deposit scheme administrator needs to know if the third party wants the deposit returned directly to them.

Choosing a TDP scheme

There are two types of TDP schemes - custodial and insurance-based. Any landlord can use the custodial scheme but there are some restrictions on who can use the insurance-based schemes.

Tenants can expect a decision as to how much of their deposit is going to be returned to them within ten days from the end of the tenancy. Any part of the deposit kept back at this stage will remain protected in the scheme being used until such time as any dispute is resolved. The exact arrangements depend on the type of scheme used.

Custodial scheme

The Deposit Protection Service (DPS) provides the only custodial TDP scheme.

Under this scheme the Deposit Protection Service holds the deposit money in a bank account. When the tenancy ends, it releases the deposit to the person who is entitled to it.

If you are a landlord based overseas, you must use the custodial DPS scheme, unless you employ a UK-registered letting agent to manage your tenancy.

If you use DPS for tenants using a rent deposit scheme (for example, a council pays the deposit) and your tenant leaves, you can agree with the council or third party to keep the deposit in place for the next tenant.

• The Deposit Protection Service (DPS) Opens new window

Insurance-based schemes

Under insurance-based schemes, the landlord or the landlord's agent holds the tenant's deposit and pays a fee to insure it (against the landlord illegally keeping the deposit). If the landlord doesn't pay the tenant the amount they are owed at the end of the tenancy, the insurer will pay the tenant and try to get the money back from the landlord.

The only two insurance-based providers are:

• MyDeposits
• Tenancy Deposit Scheme (TDS)

You can only use the TDS if you belong to an approved professional body - like a trade association - where members must have client money protection insurance. This insurance ensures that any client money held by a business is protected, even if the person or company goes out of business. Examples of approved bodies under TDS include the:

• Association of Residential Letting Agents
• Royal Institution of Chartered Surveyors
• National Association of Estate Agents
• National Approved Letting Scheme

• MyDeposits Opens new window

• Tenancy Deposit Scheme (TDS) Opens new window

Costs of using a TDP scheme

There is no charge for landlords or letting agents to use the custodial DPS. The insurance-based schemes MyDeposits and the TDS charge fees for membership and you will also have to pay insurance premiums.

Getting the information you need about the TDP scheme provider

Landlords should find out the following details from their TDP scheme provider:

• name and contact details of the scheme
• contact details for the scheme's dispute resolution service
• how to apply for the deposit's release
• what to do if the landlord or tenant can't be contacted at the end of the tenancy
• how the deposit is protected

Within 30 days of receiving their tenants' deposits, landlords must give this information to their tenants:

• the address of the rented property and the amount of deposit paid
• the landlord's or letting agency's name and contact details
• the name and contact details of any third party that has paid the deposit
• items or services covered by the deposit
• the circumstances under which the landlord will be able to retain some or all of the deposit
• what to do if there is a dispute over how much deposit should be returned

If your letting agent manages deposits and goes out of business

Landlords are responsible for making sure the deposit is kept safe with one of the schemes even if they use a letting agent to look after the deposit.

The scheme provider will expect you as landlord to pay it back any money it has to pay to the tenant if it is unable to get the money from the managing agent. You should therefore consider what arrangements your agent has made to keep tenants’ money separate and available even if it goes out of business.

• Deposit protection schemes for private tenants - problems and disputes

More useful links

• Tenancy deposit protection information: Department for Communities and Local Government Opens new window

• Tenancy deposit protection scheme advice from Shelter Opens new window

• Find a Citizens Advice Bureau or get online advice Opens new window

• Download 'Assured and Assured Shorthold Tenancies - a guide for landlords' from the Department for Communities and Local Government (PDF, 627K) Opens new window

• Download 'Assured and Assured Shorthold Tenancies - a guide for tenants' from the Department for Communities and Local Government (PDF, 498KB) Opens new window

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