TenantsTips / FAQs / Whats a Tenancy Deposit Scheme?

Whats a Tenancy Deposit Scheme?

Historically, landlords have often abused a tenants deposit using any excuse under the sun to avoid paying it back, many landlords actually considering it income! This bit tells you what schemes are out there to look after your deposit.

There are two types of tenancy deposit protection scheme available for landlords and letting agents (insurance-based schemes and custodial schemes). All schemes provide a free dispute resolution service.

What are Tenancy Deposit Schemes?

The schemes allow tenants to get all or part of their deposit back when they are entitled to it and encourage tenants and landlords to make a clear agreement from the start on the condition of the property.

The schemes:

* allow tenants to get all or part of their deposit back when they are entitled to it
* make any disputes easier to resolve
* encourage tenants and landlords to make a clear agreement from the start on the condition of the property

There are two types of tenancy deposit protection scheme available for landlords and letting agents. All schemes provide a free dispute resolution service.
Insurance-based schemes

* the tenant pays the deposit to the landlord
* the landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme

Within 14 days of receiving a deposit

The landlord or agent must give the tenant the details about how their deposit is protected including:

* the contact details of the tenancy deposit scheme selected
* the landlord or agent’s contact details
* how to apply for the release of the deposit
* information explaining the purpose of the deposit
* what to do if there is a dispute about the deposit

At the end of the tenancy:

* if an agreement is reached about how the deposit should be divided, the landlord or agent returns all or some of the deposit
* if there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved
* if for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it

Custodial schemes

* the tenant pays the deposit to the landlord or agent
* the landlord or agent then pays the deposit into the scheme

Within 14 days of receiving a deposit

The landlord or agent must give the tenant the details about how their deposit is protected including:

* the contact details of the tenancy deposit scheme selected
* the landlord or agent’s contact details
* how to apply for the release of the deposit
* information explaining the purpose of the deposit
* what to do if there is a dispute about the deposit

At the end of the tenancy:

* if an agreement is reached about how the deposit should be divided, the scheme will return the deposit, divided in the way agreed by both parties
* if there is a dispute, the scheme will hold the deposit until the dispute resolution service or courts decide what is fair

The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will be used to offer interest to the tenant, or landlord if the tenant isn’t entitled to it.



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