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General information on deposits

This content applies to England

Definition and general information about deposits, including offsetting rent against deposit and statutory control on amounts.

Definition

A deposit is a sum of money that a landlord (or her/his initial agent) can request at the beginning of a tenancy to act as security against incidences such as non-payment of rent or damage to property.  

For the purposes of the tenancy deposit protection schemes, a deposit is defined as money held, by the landlord or other, as security for:[1]

  • the performance of any obligations of the tenant, or
  • the discharge of any liability of the tenant arising out of the tenancy.

Rent in advance is not a deposit.[2]

A rent deposit for the purposes of this page should be distinguished from a 'holding deposit' which is a sum of money paid to a landlord or letting agent to secure accommodation prior to signing a tenancy agreement.

See Paying for private rented housing for more on rent in advance and holding deposits..

Tenancy deposit protection rules

With effect from 6 April 2007, a deposit paid in relation to an assured shorthold tenancy must be protected in a government-approved scheme.[3] See Tenancy deposit protection rules for details about the requirements to be fulfilled.

A tenancy deposit taken from an assured shorthold tenant can only consist of money.[4]

The tenancy deposit protection rules have been amended several times since they were first introduced in 2007. See Time limits for compliance for related details.

Offsetting rent against deposit

A tenant cannot lawfully fail to pay the last period of rent in lieu of the return of a deposit of the same amount. This is because the tenant remains liable for the rent for that period and a landlord would be able to take court action to recover the money as rent arrears. The tenant would then have to counterclaim for the return of the deposit. However, in practice, many tenants withhold rent for the final period, especially if they know that their landlord has unreasonably withheld the deposits of previous tenants.

There is a procedure for a landlord to recover a deposit from a tenancy deposit protection scheme where the tenant has withheld the final period's rent and not left a forwarding address - see Return of the deposit for more information.

Statutory control on amounts

It is not unlawful for landlords to charge deposits and, for most private tenancies, there are no statutory controls on the amount that can be charged. Therefore, if a tenant does not feel that the amount charged is reasonable, her/his only option is to not take the tenancy. However, for certain categories of occupier, there is legislation governing the amount that can be charged as a deposit:

  • Tenants protected by Rent Act 1977 - the Rent Act 1977 prohibits deposits unless they are reasonable in relation to the potential liability in respect of which it is paid and do not exceed one-sixth of the annual rent[5]
  • Tenants protected by Housing Act 1988 - this will include assured shorthold tenants. A deposit that is greater than one-sixth of the annual rent is a premium.[6] If a premium is paid on a contractual periodic tenancy, there will be no implied term requiring the tenant to obtain the landlord's consent before assigning the tenancy or subletting.

Return of deposits

At the end of a tenancy the landlord/agent should return the deposit to the tenant less any allowable deductions (for example to cover unpaid rent or damage).

For information about the return of deposits protected with a tenancy deposit protection scheme see Return of the deposit.

Where a deposit is not covered by tenancy deposit protection rules, for example a deposit paid on a tenancy other than an assured shorthold tenancy, and there is an unresolved dispute about the return of the deposit, the only recourse for the tenant is to issue a money claim against the landlord through the County Court Money Claims Centre using Court form N1 .

Wales

The legislative references and the footnotes on this page reflect the law in England. In Wales, very similar rules made under Welsh legislation apply, but the references may be different. Visit Shelter Cymru for more details about the law in Wales.

[1] s.212(8) Housing Act 2004.

[2] Johnson and others v Old [2013] EWCA Civ 415.

[3] ss 212-215C Housing Act 2004, as amended.

[4] s.213(7) Housing Act 2004, as amended by s.184 Localism Act 2011.

[4] Housing Act 2004 (Commencement No.7) (England) Order 2007 SI 2007/1068.

[5] s.128 Rent Act 1977.

[6] s.15(4) Housing Act 1988.

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