Tenancy Deposit Scheme

Tenancy Deposit Protection (TDP) schemes are run by government-approved companies which are authorised to oversee and process deposit protection, returns, deductions and disputes.

There are three schemes available in England and Wales:

Deposit Protection Service
My Deposits
Tenancy Deposit Scheme

The schemes can either be insurance backed or custodial. Insurance backed schemes allow the landlord to retain the deposit during the tenancy but do not allow them to use it to cover any claims or losses arising from tenant default. Custodial schemes require the landlord to place the full deposit in the scheme until the tenancy ends. Insurance based schemes require payment of a fee, whilst custodial schemes are free of charge.

If a deposit is given under the terms of an Assured Shorthold Tenancy agreement, the landlord must place it in the tenancy deposit scheme of their choice and inform the tenant of their of the protection by sending them information required by the scheme within 30 days of receiving the deposit.

When the tenancy ends, the landlord and tenant must agree the proportion of the deposit which must be returned within 10 days of that agreement.

If the landlord has failed to protect the deposit in one of the available schemes, the tenant can lodge a claim with the Court. The Court may then order the landlord to repay the deposit, place it in a scheme within 14 days, or require them to pay compensation to the tenant of up to three times the deposit value. Failure to use a tenancy deposit scheme will also have implications for the landlord should they later wish to serve an s21 eviction notice to the tenant. In particular, a section 21 notice cannot be served until the landlord has returned the deposit to the tenant.

The main mutual benefit of tenancy deposit schemes for landlords and tenants is the access to an alternative dispute resolution service when the tenancy ends, allowing both parties the opportunity to address any contentious issues concerning deductions from the deposit.