In the past, a deposit was often held by the landlord themselves until the tenant vacated the property, but in recent times the law has changed. Now, how can you make sure you’re not illegally holding your tenant’s deposit?
The Tenancy Deposit Protection scheme
Any tenants’ deposit must now, by law, be placed in a government-approved tenancy deposit protection (TDP) scheme. This applies to any property rented out an assured shorthold tenancy, where this tenancy agreement began after 6th April, 2007.
The only exception is if you hold a valuable item that belongs to the tenant, to act as a deposit in place of money. If a landlord does hold a valuable belonging such as a watch or car, they are not obliged to place it in a TDP.
TDP schemes exist to ensure that tenants will get any cash deposit back as long as they do no damage to the property, comply with the tenancy agreement terms, and keep up with the rent and bills.
The landlord, or their letting agent, must put the deposit into a TDP scheme within 30 days of receipt. In England or Wales, landlords can use either MyDeposits, the Deposit Protection Service or the Tenancy Deposit Scheme.
The deposit should be returned at the end of the tenancy within 10 days of agreeing how much they will get. If there is a dispute, the deposit will remain in the scheme until this is settled. Where a holding deposit has been taken from future tenants, this doesn’t have to be protected until they actually move into the property.