How Should I Deal With a Tenant’s Deposit?
When letting a premises under an assured shorthold tenancy, you are legally obliged to protect the deposit in a tenancy deposit scheme. You must provide information regarding the deposit to the tenant within 14 days.
There are three government-authorised schemes:
- Tenancy Deposit Scheme: an insurance-based scheme that is only open to approved trade association members. The landlord or managing agent holds the deposit but a fee is paid to insure the money. If the landlord or agent wrongfully fails to repay the deposit, the insurance company will pay it back. The tenant pays nothing.
- MyDeposits: this insurance-based scheme works in the same way as the Tenancy Deposit Scheme.
- Deposit Protection Service: this service allows any landlord to hold a deposit in a bank account. Once the tenancy ends, the deposit is returned to the person who is entitled to it. The scheme is free for both tenants and landlords.
If landlords fail to protect tenants’ deposits they lose the right to recover the possession of their property by only giving the tenant notice under Section 21 of the Housing Act 1988 – which is the usual reason for using an assured shorthold tenancy. Failing to comply with deposit protection rules can also result in landlords having to pay a fine of between one and three times the amount of the original deposit.
It’s advisable to seek specialist legal counsel if you are involved in a dispute, to help ensure your position is safeguarded. Speak to Helix Law today for advice on these matters.
On 28 October 2025 the long awaited Renters Rights Act 2025 (‘the Act’) received Royal Assent meaning it is now law. This includes very significant changes for landlords and tenants including changes to tenant rights, deposits, notices and eviction processes amongst others. At present the Act has not yet come into force however this is anticipated fairly soon. For the current position on this see our blog here. This legislation includes numerous changes designed to alter the relationship between landlords and tenants, aimed at giving tenants greater security of tenure. Landlords should ensure you remain up to date on the legislation to avoid later difficulties. Contact our team if you need assistance and we will be happy to help.