Tenancy deposit protection schemes

A  tenancy deposit protection scheme will:[1]

• safeguard deposits for private assured and assured shorthold tenancies

• resolve disputes regarding the return of deposits at the end of the tenancy

With a custodial scheme, the deposit is paid by the landlord into an account held by the approved scheme administrator. This amount is held by the scheme until the end of the tenancy. The deposit is then returned (less any amount agreed to be paid back to the landlord in respect of damages, unpaid rent, etc.) to the tenant.[2]

There is no requirement for any interest accumulated on the deposit to be repaid to the tenant or landlord.

With insured schemes, the landlord retains the deposit for the duration of the tenancy, but pays a premium to the scheme administrator to cover against the possibility that the landlord may default on returning the agreed amount at the end of the tenancy. In addition, at the end of the tenancy the landlord undertakes to pay back any disputed amount, if so required by the scheme administrator.[3]

There are three approved scheme administrators which, with effect from 1 April 2016, all provide both custodial and insurance-backed services:[4]

• Deposit Protection Service (DPS)

• MyDeposits - this includes all deposits previously protected by Capita

• Tenancy Deposit Scheme (TDS)

Each scheme has its own terms and conditions, as well as differing rules about who can join the scheme, return of the deposits at the end of the tenancy, alternative dispute resolutions, and change of tenant and/or landlord during the tenancy.