Jul 15

How to Protect your Tenant’s Deposit

Renting out a property can be confusing, especially for first time landlords. However protecting a tenant's deposit doesn’t have to be, and it isn’t - once you understand the basics.

With legislation introduced in 2007, tenancy deposit protection has become a significant aspect of the buy-to-let process. It is now a legal requirement to protect your tenants’ deposit and failure to do so could lead to fines or other penalties so it’s important that you understand your obligations.

Types of Tenancy Deposit Protection

There are two main types of tenancy deposit protection: insurance-based and custodial. An insurance-based scheme such as that offered by my|deposits England and Wales means that for a small fee, the landlord can keep hold of the deposit for the length. A benefit of an insurance-based scheme is that the landlord can agree with the tenant the amount to be returned without involving the scheme.

A custodial-based scheme, such as that offered by my|deposits Scotland and my|deposits Northern Ireland means that the scheme holds onto the deposit in a safe, secure bank account for the duration of the tenancy. At the end of the tenancy, both the landlord and the tenant must apply for the release of the deposit. This type of protection is used to protect all tenancy deposits in Scotland.

My|deposits Northern Ireland offer both the insurance-based and custodial schemes allowing the landlord to choose their preference.

The following information applies for my|deposits England & Wales:

What the Law Requires

As of April 2007, landlords are required to protect their tenant’s deposits and serve the Prescribed Information within 30 days of receiving it, through one of three government backed schemes. Prescribed Information includes details about the scheme used, instructions about disputes and key contact information.

Should a landlord fail to do any of the above, they could face a possible fine of up to three times the deposit amount as well as potentially being unable to serve the Section 21 notice resulting in potential difficulties evicting tenants and recovering possession of the property.

Providing there are no disputes, the landlord has 10 days to return the deposit to the tenant once the final amount has been agreed.

How it Benefits the Landlord and Tenant

Firstly, as it is a legal requirement, protecting their tenant’s deposit ensures that the landlord is meeting their obligation and will therefore avoid being penalised by authorities. The tenant can also be assured that their deposit is protected safely and that the returning of the deposit will be conducted in a fair manner.

Furthermore, the my|deposits scheme offers an Alternative Disputes Resolution service which allows the landlord and tenant to settle any disputes over the deposit without having to go to court for a final ruling. This could save both parties the costs that are usually associated with legal fees.

How to Deal with Disputes

The landlord has the right to withhold part or all of the deposit if they feel that the tenant has breached any of the terms in the tenancy agreement. A dispute will occur if the tenant feels that their deposit was withheld unjustly or excessively.

My|deposits will only get involved if the tenant disagrees and raises a dispute with the scheme for the amount that the landlord is proposing is returned to them. In this case, the scheme will appoint independent adjudicators to make a binding decision on the return of the deposit amount. It is worth noting here that the deposit is still seen as the tenant’s money until the landlord can justify the reductions. The onus is therefore on the landlord to give detailed reasoning as to why they are entitled to part or whole of the deposit.


As one of three government backed schemes, my|deposits have become an award winning deposit protection scheme by working closely with the leading landlord organisation, the National Landlord Association.

With an ‘Outstanding’ for customer service awarded by Investors in Customers, award winning dispute resolutions and deposit protection fees starting from as little as £12.60, it is easy to see why my|deposits have successfully protected more than a million deposits with over 100,000 landlords using the service.

For further information or to protect your tenant’s deposit, visit the my|deposits England & Wales website or call 0333 321 9401.

Landlords in Scotland should visit mydepositsscotland.co.uk.

For my|deposits Northern Ireland visit mydepositsni.co.uk.

About the author


View more posts by Total Landlord Insurance

Total Landlord Insurance is not responsible for the content of any external sites referenced in the comments below.

comments powered by Disqus