Tenancy deposit schemes

This page gives information about schemes that came into force on 6 April 2007 to protect deposits paid on assured shorthold tenancy.

What the law says

Any deposit paid by a young person on a property let under an assured shorthold tenancy (the most common type of private rented tenancy) that starts, or is renewed, after 6 April 2007 must be protected in a Government-approved tenancy deposit protection scheme.

Why have tenancy deposit schemes?

The aim of the schemes is to endure greater fairness and consistency in the handling of deposits, insofar as they:

• encourage landlords and young people to reach agreement at the outset of the tenancy as to the condition and the contents of the property
• include a service for resolving disputes about the return of the tenancy at the end of the tenancy without the young person necessarily having to resort to court action
• will ensure that young people's deposits are returned quickly.

How do the schemes work?

The landlord must protect the deposit in a scheme, and inform the young person they have done so, within 14 days of their paying the deposit.

There are two types of scheme.

• Custodial schemes: the scheme provider retains the deposit during the tenancy and any dispute. The Government has approved one custodial scheme, run by The Deposit Protection Service.
• Insurance schemes: the landlord retains the deposit, but pays a fee to the scheme, who are insured against failure by the landlord to repay any part of the deposit due to the young person at the end of the tenancy. If there is a dispute, the landlord must pay the disputed amount to the scheme while it is being resolved. The Government has approved two organisations, The Dispute Service Ltd and Tenancy Deposit Solutions Ltd.

At the end of the tenancy, the landlord and young person must agree on the amount of the deposit returned to each. If they cannot agree, then the scheme's dispute service may be used to resolve the dispute. If either refuse to use the dispute service, then a small claim can be made in the courts, as was the situation previously. The scheme must return the deposit in line with the decision of the dispute service or the court. There are special arrangements if the landlord or the tenant is missing.

What if the landlord doesn't protect the deposit?

If a landlord fails to protect the deposit, and inform the tenant that they have done so, within 14 days of accepting the money, then the young person can take them to court. If the court finds that the landlord has not protected the deposit or informed young person, it must order the landlord to protect the deposit, or return it to the young person, and to pay an amount equivalent to three times the deposit to the young person.

The landlord also cannot evict the young person using a 'section 21' notice (that is, a notice where the landlord does not have to have a reason for the eviction after 6 months of the tenancy have elapsed) while the deposit is not protected.

How can I help?

Ensure young peoples' deposits are protected

Any young people who are starting a new assured shorthold tenancy should be advised to ask their landlord if they have protected the deposit. Shelter have produced deposit envelopes to help them to do this. Advisers can order envelopes here.

Ensure that there is an inventory

An accurate inventory will be important if there is a dispute at the end of the tenancy. If the landlord has not prepared an inventory, you can help the young person to prepare one, which they can then ask the landlord to sign (or it can be signed by you as an independent witness).

Advise young people where their deposit hasn't been protected

This could involve helping the young person make a claim because the deposit hasn't been protected. However, if the young person wants to stay in the tenancy long-term, you may want to advise them that making a claim could put their tenancy at risk (as - once the deposit is protected - the landlord will be able to use a section 21 notice).

Help young tenants to get their deposit back

Where a young person's tenancy is coming to an end, you can help them to reach agreement with the landlord, or inform the scheme if the young person and landlord cannot reach agreement.

Further information

Legislation and guidance

Sections 212-215 and Schedule 10 of the Housing Act 2004 contain the law regarding tenancy deposit schemes. The arrangements for if the landlord or tenant is missing, along with some other minor provisions, are contained in The Housing (Tenancy Deposit Schemes) Order 2007.

Free downloads

Private tenants - paying a deposit contains information about deposits and the schemes.

Shelter Legal: the online guide to housing law

See the pages on deposits for more information.