Tenancy deposit protection when a landlord changes

As a general rule, when there is a change of landlord, the new landlord will take on the responsibility for the return of the deposit at the end of the tenancy, regardless of whether the old landlord passed on the tenant's deposit or not. This is because in law the new landlord takes on the benefits and liabilities of the old landlord.[1]

When a deposit is protected in a government-approved scheme, the procedure for ensuring that it remains protected depends on whether it was in a custodial or insurance-backed scheme. The internal rules of each scheme set the requirements to be satisfied in connection with a change of landlord. 

For more information about the different types of tenancy deposit protection scheme and links to their websites, see The approved schemes.

Custodial scheme

A deposit placed in a custodial scheme remains protected unless  the landlord or tenant take steps to remove it after the end of a tenancy,[2] or in other circumstances specified in the scheme rules. This includes when there is a change of landlord and all the procedures and formalities set by the scheme are followed. If not the deposit will no longer be being 'dealt with in accordance with an authorised scheme' and the landlords may incur penalties for non-compliance.[3] The new landlord may be unable to serve a section 21 notice, and the old landlord may be at risk a section 214 claim from the tenant for financial compensation.[4]

Insurance scheme

The legislation around tenancy deposit protection is silent on what happens to the deposit in an insurance scheme when a landlord changes. However, the scheme rules are likely to require that notification is given of the change. The scheme may simply change details on notification, may end protection (thus requiring the new landlord to protect the deposit afresh, either in the same scheme or in a different one), or may require that the new landlord protects the deposit before ending the existing protection.

The contract of sale of the property will normally provide that the deposit is transferred from the old to the new landlord. Where this occurs, the new landlord will have to ensure that the deposit is protected. If protection has ended, they will need to arrange for new protection within the relevant time limits (currently 30 days, but see Time limits for compliance for details of when different time limits were applicable).[5] They will also have to serve the prescribed information on the tenant and any 'relevant person' within the time limit.[6] Otherwise, they will risk all penalties for non-compliance.

Where the deposit is not transferred from the old to the new landlord, the obligation to ensure that it is protected (and the risk of a penalty if it is not) will continue to rest with the original landlord.[7] It is, however, in the new landlord's interest to ensure that protection continues, as if it does not they will be unable to serve section 21 notice to end the tenancy.[8]

If the landlord has a mortgage on the property rented to the tenant and the lender repossess it, the lender will only be responsible for the return of the deposit to the tenant if they are bound by the tenancy and become the tenant's landlord.

For more details on tenancies binding on a mortgage lender, see Tenant's rights when a landlord is repossessed.