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Top tips for getting tenancy deposit protection right

Despite the anti-landlord policies adopted by the government, many investors continue to be drawn to the buy-to-let market as the returns routinely outperform those of other investments

Buy-to-let returns continue to beat many other mainstream investments, including commercial property, UK government bonds and cash, while remaining a highly popular alternative to the volatility investors often risk when investing in the stock market.

Yet, many landlords are putting their property investments - probably their biggest assets - at risk by failing to comply with basic legislation, such as placing their tenants’ deposits in a government-backed tenancy deposit scheme within 30 days of receiving the deposit.


Deposits taken on assured shorthold tenancies in England and Wales by landlords or letting agents must be protected within 30 days in any one of three government-backed insurance based or custodial deposit protection schemes operated by MyDeposits, Deposit Protection Service (DPS) and the Tenancy Deposit Scheme (TDS).

Insured scheme

The insurance product enables landlords or agents to retain the deposit during the tenancy but in return pay a protection fee to the scheme.

Custodial scheme

The custodial scheme allows landlords or agents to hand over the deposit for protection during the tenancy, with no fees attached. The scheme is funded entirely from the interest earned from the deposit pool.

There are separate tenancy deposit protection schemes in Scotland and Northern Ireland.

The three appointed scheme administrators in Scotland are Letting Protection Service Scotland, Safedeposits Scotland and MyDeposits Scotland.

In Northern Ireland, the schemes are Deposit Scheme Northern Ireland, MyDeposits Northern Ireland and Letting Protection Service NI. 

Although it has been mandatory to hold a tenancy deposit in a tenancy deposit scheme since 2007, as many as 300,000 landlords are estimated to be running the risk of a heavy fine for not placing money into a government authorised scheme, research reveals.

Even if the property is managed by an agent, it is the landlord’s responsibility to ensure the deposit is properly protected.

Here are some top tips from the Residential Landlords Association for getting deposit protection right:

+ If you accept the deposit in installments, remember that each individual payment would need to be protected within 30 days of receiving each part.

+ If you have an agent managing the deposit protection, ask for a copy of the deposit protection certificate – if your agent doesn’t protect the deposit on time then you will be liable for between one and three times the deposit amount.

+ If you choose to use insurance-backed deposit protection such as TDS Insured or DepositGuard, include a stipulation in the tenancy agreement about what will happen to any interest the deposit generates at the end of the tenancy.

+ Ensure you include in your tenancy agreement all the reasons that you might need to use the deposit – e.g. cleaning, redecoration, damage, removal of items, replacement of items, rent arrears, gardening, etc. If you have not put a clause stating that the deposit may be used to cover loss in the instance then should a dispute arise you may be unable to claim the money from the deposit.

+ Ensure you make a thorough inventory and check in/out report which includes the condition, age and cleanliness of all items – this will give you a good starting point in any deposit deduction claims.

+ Remember that you must serve the prescribed information along with the scheme leaflet within 30 days of receiving the deposit. It is generally a good idea to have evidence that the tenant received such as their signature or proof of postage.

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