What is a tenancy deposit?

Most private landlords ask new tenants to pay a tenancy deposit to cover damage or unpaid rent.

Why you pay a tenancy deposit

You pay a tenancy deposit to give your landlord protection in case you leave without paying the rent or cause damage to the property or its contents.

Your landlord should confirm in writing what the deposit covers. This may be set out in your tenancy agreement or your landlord may give you a separate document that's signed by both you and your landlord.

What a tenancy deposit costs

Landlords usually ask for a tenancy deposit that's equivalent to one or two months' rent.

You may be asked to pay a bigger deposit if the landlord is concerned about your credit rating or if you can't provide someone to act as a guarantor.

There's no legal limit on the amount that landlords can ask for.

Who you pay the deposit to

Tenancy deposits are often paid direct to landlords.

You may be asked to pay the tenancy deposit to a letting agent if you rent a home through them.

How your deposit is protected

If you are a private tenant with an assured shorthold tenancy, your deposit must be protected with a government-backed tenancy deposit scheme.

Your landlord must follow tenancy deposit protection scheme rules.

Why you should make an inventory

You'll need to check and agree an inventory before you move in. This can prevent disputes about how much of your deposit should be returned when you move out.

How to get your deposit back

Your tenancy deposit is your money. 

If you've paid all the rent due and caused no damage, the full amount of your deposit should be returned at the end of your tenancy.

Your landlord can make reasonable deductions from your deposit to cover certain losses.

Find out what to do if your landlord hasn't returned your deposit.

Holding deposits

You might be asked for a holding deposit when you agree to rent a property.

By paying a holding deposit, you commit to taking up the tenancy so that it isn't let to someone else. The landlord or letting agent holds the property for you until you sign the contract.

A holding deposit should be returned to you when you sign the contract. It can also be used as payment towards rent in advance or your tenancy deposit.

Holding deposits do not have to be protected in a government-backed scheme.

If the holding deposit is used as part of your deposit, tenancy deposit protection rules apply from that point.

Check what the holding deposit covers, how it will be used and the conditions for a refund.

Don't pay a holding deposit unless you are certain you want that particular property. If you decide not to move in, it could be difficult to get it back.

Smart deposits

A landlord or letting agent may ask you to pay a non-refundable smart deposit rather than a tenancy deposit. 

Despite the name, this is not a deposit. It's an insurance policy.

You pay either a lump sum or a monthly amount on top of your rent. The cost is less than you would pay for a tenancy deposit, but you don't get any of it back when you leave.

After you leave, if you owe the landlord rent or have damaged the property, the insurance company makes a pay out to the landlord. The insurance company can ask you to repay any money it pays to your landlord.

Smart deposits do not have to be protected in a government-backed scheme.

Last updated 06 Feb 2017 | © Shelter

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