This page is targeted at housing professionals. Our main site is at www.shelter.org.uk

Protection termination under insurance schemes

This content applies to England

A deposit can cease to be protected under an insurance scheme before the tenancy comes to an end.

When deposit can cease to be protected before end of tenancy

A deposit may cease to be protected under an insurance scheme before the tenancy comes to an end. The circumstances when this can happen include the following:

  • the landlord or agent gives the scheme administrator notice that s/he no longer wishes to use the scheme[1]
  • at the end of a tenancy, the landlord or agent fails to pay amounts to the scheme when ordered to do so (this could be when on being ordered to do so when there is a dispute over the amount withheld or the amount outstanding after a final decision with respect to the deposit) or to comply with other requirements specifically stated by the scheme to be necessary in order for continued protection.[2] If the scheme requires landlords to be members in order to benefit from protection, it can also end membership of the scheme on this basis.[3]

If a landlord's membership of the scheme is terminated because s/he does not comply with a requirement of the scheme, this will not invalidate the protection of deposits which had been held in the scheme and where the tenancy ended before the termination.[4]

Payment of fees in connection with tenancy deposits

Non payment of fees is likely to count as a failure to comply with requirements imposed by the schemes and protection could be ended if they are not paid. Note, however, that there is no requirement for schemes to charge renewal fees and that in some cases, a one-off payment may be enough to keep a deposit protected indefinitely (as long as the landlord does not give notice that s/he no longer wishes to use the scheme or fail to comply with another requirement). Advisers should check the policies of each scheme to determine whether this is the case for the deposit in question.

What the scheme administrator must do

Where a deposit ceases to be protected under the scheme, the scheme administrator must follow a set procedure:

  • if the deposits are to cease to be retained under the scheme or the landlord's membership of the scheme is to be terminated because of a failure of the landlord to make a payment or satisfy a requirement of the scheme, the scheme administrator must serve notice on the landlord stating that the scheme administrator proposes to make such a determination and the reasons for doing so.[5] After 14 days, the scheme administrator must determine whether the deposit should cease to be retained and/or the landlord's membership of the scheme terminated.[6] This implies that if the landlord makes the payment within the 14 days, the scheme administrator has discretion to not terminate her/his membership or cease to retain the deposit under the scheme
  • the scheme administrator must determine the date on which the relevant deposit(s) will cease to be retained under the scheme or the landlord's membership will be terminated.[7] This must not be less than three months after the landlord has served notice that s/he no longer wishes to use the scheme, or the scheme administrator has served notice on the landlord[8]
  • at least two months before[9] the landlord's membership of the scheme will be terminated and/or deposit will cease to be retained under the scheme, the scheme administrator should serve notice on the landlord and the tenant identifying the deposit in question; stating that this will happen and the date on which it will happen; and stating that the deposit will still need to be protected under a scheme.[10]

What the landlord/agent must do

If a deposit ceases to be protected under an insurance scheme, it must be protected in another scheme before the date on which it ceases to be protected under the previous scheme. The landlord or agent must then notify the tenant about the details of the new scheme, within 30 days of the deposit ceasing to be protected under the previous scheme.[11]

If a deposit ceases to be protected before the end of the tenancy, the landlord/agent will be liable to the Penalties for non compliance if s/he does not protect the deposit in another scheme and serve the prescribed information within these time limits.

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] para 5(1A), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[2] para 5(3A), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[3] para 5(4), Sch.10 Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[4] para 5(4B), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[5] para 5(3B), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[6] para 5A(3)(a) and (5)(a), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[7] para 5A(2)(a), (3)(a), and (5)(a), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[8] para 5A(7), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[9] para 5A(8), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[10] para 5A(4) and (6), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

[11] para 5A(9), Sch.10, Housing Act 2004, as amended by Housing (Tenancy Deposit Schemes) Order 2007 SI 2007/796.

Back to top