Tenancy Deposit Protection Schemes - A List for Landlords

By Mary Latham

Old and new £20 note illustrating that landlords could save money using an online letting agent.

Tenancy Deposit Protection Schemes – A List for Landlords

Up until 2013 landlords had a choice of only 2 tenancy deposit protection schemes when protecting tenants deposits.

  1. To hold the funds in their own bank accounts and pay an Insurance Premium to cover the cost of potential arbitration in the event of a dispute at the end of the tenancy and to cover the cost of running the scheme
  2. To pay all of the money into the Custodial Scheme where the interest made on the funds held would pay for the potential arbitration in the event of a dispute at the end of the tenancy and to cover the cost of running the scheme
Old and new £20 note illustrating that landlords could save money using an online letting agent.
Landlords have a choice of 5 Tenancy Deposit Protection Schemes.

Tenancy Deposit Protection Schemes

Having made that decision the landlord may have a further choice to make if he decides to hold the funds and use an Insurance based scheme because there were, until now, two options.

Any Tenancy Deposit Protection Schemes must hold a Government Contract in order to operate.  The three schemes that have held a contract are:

  1. Deposit Protection Service DPS
  2. Mydeposits
  3. Tenancy Deposit Protection Scheme

The DPS is the only Custodial scheme, the other two offer the Insured option.

From 1st April 2013, a further insurance backed scheme became available:

  1. DPS Insured Scheme

Tenancy Deposit Protection Schemes Legislation

Information about legislation related to Tenancy Deposit Protection Schemes and the various schemes that are Government approved can be found here https://www.gov.uk/tenancy-deposit-protection/overview.

It is very important that landlords do not put deposits into any scheme that is not authorised by Government, there have been bogus web sites over the last few years and landlords have been caught out.

The other important thing to remember is that there are two elements to tenancy deposit protection scheme legislation

  1. The need to protect tenants deposits within the prescribed time frame. The changes in the Localism Act mean that a landlord has only 30 days from the time that the deposit is paid to protect it, and to give the tenant and any third party who may have paid the deposit, the Deposit Protection Certificate and the Prescribed Information for Tenants provided by the scheme.  Failure to meet these legal requirements could cost the landlord up to 400% of the deposit.
  2. The need to meet all the rules of the chosen scheme, this is part of the legislation and must not be ignored. These vary from scheme to scheme and can change within a scheme from time to time.  Landlords must check the website of their chosen scheme on a regular basis to make certain that they meet with any new requirement because failure to do so may mean that the tenants deposit has not been protected as it should have been throughout the whole tenancy.

Do I need to re-protect a deposit when a fixed term ends?

An issue that has come to light recently is that one of the tenancy deposit protection schemes have changed their rules in January 2012.  The change meant that a deposit needed to be re-protected when a fixed term ended and the tenancy rolled over into a Statutory Periodic Tenancy.  If the landlord did not re-protect the deposit at that point the deposit was no longer protected and the landlord will have broken the law.

The penalties for this are severe because a court may award the tenant up to 400% of the deposit as compensation.  This can hang over a landlords head for up to 6 years after the tenancy has ended. Other schemes may ask the landlords to update the record to show that the tenancy has continued beyond the fixed term and no new contract has been put into place, these schemes may not issue a new certificate and will continue to protect the deposit until it is unprotected, their request for an update is for administrative purposes only.

A new contract (AST) always means a new protection with an Insurance based scheme.

Tenancy deposit protection has become an administrative burden for landlords renting out a house and many are choosing not to take a deposit, this is of course a commercial decision and we must all make our choice.

Please be warned that any money taken to cover losses or damages is, in law, a deposit regardless of what the landlord chooses to call it, and must be protected.

Mary Latham, Landlord.  Follow me @landlordtweets

LettingaProperty.com offers a tenancy deposit protection solution as a stand alone service or as part of our Gold and Platinum letting Packages

See also: Government recently announced proposals for tenancy deposit caps to one month’s rent!

About Mary Latham

Mary has been a landlord since 1972, letting all types of property to most client groups and carrying out much of her own refurbishment.

She was founder and Chair of the Association of Midlands Landlords where she ran a help line for landlords for 9 years, until AML joined The National Landlords Association in 2007 and she became the West Midlands Regional Representative for NLA.

Tenancy Deposit Protection Schemes - A List for Landlords
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Tenancy Deposit Protection Schemes - A List for Landlords
There are 4 Tenancy Deposit Protection Schemes available to landlords. Here is a list of Tenancy Deposit Protection Schemes to protect your tenants deposit.
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