Frequently asked questions about:
Deposits

No, Landlords are not obliged to take deposits from Tenants and they are furthermore not obliged to register with a tenancy deposit scheme where no deposit has been taken. For these Landlords, there are alternatives to taking deposits, such as guarantors, insurance, tenant references and credit checks.

The amount of the deposit varies between 4 weeks rent to 2 months rent. It is usually between 5 and 6 weeks rent and should never be higher than 2 months rent.

The terms and conditions of the deposit should be included in the Tenancy Agreement between the Landlord and the Tenant. Normally the security deposit will cover the following: damage to the Landlord's property, fixtures, fittings and furniture; cleaning; rubbish removal; unpaid rent; unpaid accounts where the Landlord may be held liable; and replacement locks and/or keys.

Yes, as from 6 April 2007, when a Landlord takes a deposit from a Tenant, the deposit must be protected in a government-authorised tenancy deposit scheme. There are currently 3 authorised tenancy deposit schemes available: the DPS Custodial Scheme; the Dispute Service (TDS); and the Tenancy Deposit Solutions Limited (TDSL).

The custodial schemes hold the deposit until it is repaid to the Tenant at the end of the tenancy. In insurance-based schemes the Landlord holds the deposit and pays the insurance scheme to insure against the Landlord failing to pay the deposit back to the Tenant at the end of tenancy.

The DPS Custodial Scheme is the only custodial scheme and is run by the Deposit Protection Service (DPS). It is the favoured scheme for Landlords as it is free of charge. It is funded by the interest received on the tenancy deposits held by the scheme. The Tenant pays the deposit to the Landlord who then pays the deposit into the scheme. The Dispute Service (TDS) is an insurance-based scheme whereby the Landlord pays an annual fee to join the scheme. The Landlord is then entitled to hold onto the deposit until such time as a dispute arises. The Landlord must then forward the portion of the deposit that is in dispute to the scheme, who will then adjudicate on the matter and distribute the deposit in terms of its decision. If the Landlord defaults and keeps the deposit, the insurer linked to the scheme will pay all or part of it back to the Tenant if they are entitled to it. The scheme will then attempt to recover the monies from the Landlord. The Tenancy Deposit Solutions Limited (TDSL) is also an insurance-based scheme whereby the Landlord pays an annual fee to join the scheme. The Landlord is then entitled to hold onto the deposit until such time as a dispute arises. The Landlord must then forward the portion of the deposit that is in dispute to the scheme, who will then adjudicate on the matter and distribute the deposit in terms of its decision. If the Landlord defaults and keeps the deposit, the insurer linked to the scheme will pay all or part of it back to the Tenant if they are entitled to it. The scheme will then attempt to recover the monies from the Landlord.

Landlords must notify the Tenants of which scheme they have elected to use within 14 days of having received the deposit. Landlords using the custodial scheme must also pay the deposit to the DPS within these 14 days. Furthermore, Landlords must give the Tenants the following prescribed information within 14 days of having received the deposit: contact details of the elected scheme; contact details of the Landlord; how to apply for the release of the deposit; the purpose of the deposit and how it is to be held; and what to do where there is a dispute relating to the return of the deposit. Landlords also need to sign a certificate confirming that the information given relating to the tenancy deposit and the elected scheme is accurate to the best of their knowledge and belief and that they have given the Tenant an opportunity to sign any document containing the prescribed information in confirmation that the information provided is accurate to the best of their knowledge and belief.

At the end of the tenancy, if the Landlord and the Tenant have agreed as to whether the deposit should be returned in full or in part, or should be retained by the Landlord, the deposit must be paid out within 10 days. With the custodial scheme, the 10 days will run from the date of the scheme being notified of such agreement. With the insurance-based schemes, the 10 days will run from the date that the Tenant requests the return of the deposit. In the case of a dispute between the Landlord and the Tenant relating to the deposit, both the custodial and the insurance-based schemes offer free alternative dispute resolution (ADR) services, the outcome of which will be binding upon both parties. Under the custodial scheme, the undisputed portion of the deposit with any interest is paid out within 10 days of notification of this amount. The scheme will hold onto the disputed amount until the alternative dispute resolution process or the court makes a decision. Upon notification of that decision, the scheme has 10 days to pay out the balance of the deposit to the relevant party. Under the insurance scheme, the Landlord must return the undisputed portion of the deposit within 10 days of the Tenant's request. The disputed amount must be lodged with the scheme pending the outcome of the dispute resolution process or the court case. Upon notification of that decision, the scheme has 10 days to pay out the balance of the deposit to the relevant party.