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What is a Tenancy Deposit Scheme?

about 1 month ago
What is a Tenancy Deposit Scheme?

Paying a deposit at the start of a property rental is often the most expensive part of the process. By law it must be protected by landlords throughout the tenancy. To help you understand why they are required and how they are protected, we’ve put together all the information you need to know about Tenancy Deposit Schemes.

What is a deposit?

Before renting a property you will be asked to provide a lump sum of money upfront, along with the first month’s rent. Since June 1, 2019, for annual rent totals of £50,000 or less, this is now capped at a maximum of five weeks.

For example, tenants renting a property at £1,000 a month could be asked to pay a maximum deposit of £1,153.85 by using the following calculation: 1 month’s rent x 12 / 52 = 1 week’s rent

Why is a deposit needed?

The deposit offers the landlord some financial protection during the course of the tenancy. If the property experiences any damage, or any unpaid bills or rent are left outstanding when the tenant moves out, the landlord has the right to claim compensation from the deposit.

However, if there are no issues with any of the above, and the property is left in the same condition as it was presented to the tenant when they moved in, then the full deposit amount must be returned.

A standard way to record any potential damages made to the property is for the landlord to provide an inventory before the tenant moves in. This should list the furnishings included in the property and their condition and is signed by both parties.

It is also advisable for photographs to be taken to avoid any disputes related to general wear and tear of fittings and fixtures during the course of the tenancy.

If any issues related to the property do arise during the tenancy, the occupant should inform the landlord as soon as possible. For example, if repairs or maintenance are required but are left to deteriorate without notifying the landlord, the tenant may be liable for further compensation at the end of the tenancy.

What is the tenancy deposit scheme?

Created by the Government in 2007, the tenancy deposit scheme is designed to protect the lump sum handed to landlords at the start of the tenancy.

If the property is being rented using an Assured Shorthold Tenancy, the money can only be placed in a Government-approved deposit protection scheme.

While it is good practice to place the deposit in these schemes wherever possible, there are circumstances where it does not apply. For example, these schemes are not required for students living in a hall of residence, or if the landlord lives in the same property as the tenant.

The three government-backed schemes that must be used in England and Wales are the Deposit Protection Service (DPS)MyDeposits and the Tenancy Deposit Scheme (TDS).

What are the landlord’s legal requirements for the deposit?

Once the tenancy agreement has been signed, the landlord (or agent) must place the full deposit into one of the aforementioned schemes within 30 days of receipt.

The tenant should then be provided with full details of the scheme, including information related to getting the deposit back, possible disputes and what they should do if the landlord is uncontactable at the end of the tenancy.

Receiving the deposit at the end of the tenancy

A decision about the deposit amount to be returned to the tenant should be made once the tenant has checked out of the property. In most cases this is then transferred directly to the tenant’s bank account.

As long as there are no outstanding rent or bills, no damage has been caused to the property or content and the tenancy agreement terms have been met, the tenant should receive their full deposit back.

If there is a dispute about the amount of deposit offered or received, both parties will have to follow the guidelines set out by the chosen deposit protection scheme.


If you have any questions regarding tenancy deposit schemes, please call our expert letting agent team on 020 8459 2530 who will be happy to provide you with more information.

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