What is a deposit protection scheme and how does it protect me as a Landlord?
All tenant deposits must be registered with a government approved tenancy deposit protection scheme.
When letting out a property, a deposit will be paid by the tenant as security against damage or non-payment of rent. In 2007 it became compulsory for all landlords to protect this deposit under a Deposit Protection Scheme which safeguards the money so that it will be returned to the tenant at the end of the tenancy as long as all conditions have been met. This protection was introduced to help raise lettings industry standards and ensure tenants are treated fairly at the end of the tenancy.
There are three government approved schemes which a Landlord can choose to protect the deposit through. These are:
The Deposit Protection Service (DPS)
The Tenancy Deposit Scheme (TDS)
Under each of these schemes there are two options available for how the money is secured; a custodial scheme and an insurance scheme. Which you choose will depend on whether you prefer to hold the monetary deposit amount yourself or have it secured independently.
Custodial Scheme: In a ‘Custodial Scheme’ the landlord pays the actual monetary value of the deposit to the scheme who hold it in a client account until the end of the tenancy.
Insurance Based Scheme: In an ‘Insurance Based Scheme’ the landlord is able to keep the deposit monies themselves and choose to pay a fee to the scheme to protect it.
Regardless of which scheme a landlord chooses to use, Once the deposit has been protected, a landlord must send proof of this to the tenants along with the following information:
the amount of the deposit
the address of the property
whether the deposit is in an insured or custodial scheme
the name and contact details of the tenancy deposit protection (TDP) scheme and its dispute resolution service
landlord or agent correspondence details
reasons why you may withhold the deposit at the end of the tenancy
how the tenant goes about getting the deposit back at the end of the tenancy
what the tenant should do if they can’t get hold of the landlord at the end of the tenancy
what to do if there’s a dispute over the deposit
The Deposit Protection scheme that you use will provide you with a templated document to fill in the necessary information.
As a landlord you must comply with the rules of the scheme to ensure that you have a valid claim to withhold the deposit in the event of any damages. To comply fully you must:
Protect the deposit amount within 30 days of the commencement of the tenancy.
Have an inventory of the property condition carried out at the outset of the tenancy which is agreed to and signed by both tenant and landlord.
Ensure that the details that the deposit is registered with (name and contact details of the tenants, start and end date of the tenancy agreement and exact deposit amount) are 100% accurate.
Provide proof of the deposit protection and details of the scheme (‘Prescribed Information’) in writing to the tenant (and any interested third party) within the 30 day period.
If you fail to carry out any stage of the deposit protection process correctly there can be very serious repercussions. Failure to serve the deposit information within the correct timescales may make a Section 21 Notice to regain possession of the property invalid and the court may also order you to repay up to 3 times the deposit value to the tenants as a fine.
As part of a managed service with ludlowthompson you can choose for us to take care of the deposit protection for you. Your Property Manager can guide you on the process.
3rd July 2015
DISCLAIMER: Neither ludlowthompson nor their ‘experts’ take any responsibility for any action or loss incurred by readers of these pages. The reader acts on advice at their own risk. Answers to questions are not exhaustive. Financial advice must always be sought from a professional financial adviser
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