Tenant Deposit Protection Guide for UK Landlords

Why must deposits be protected?

Deposit protection laws exist to ensure tenants get their money back fairly at tenancy end. The scheme holds or guarantees the deposit, preventing landlords from wrongfully withholding it.

Since 2007, all deposits for assured shorthold tenancies in England and Wales must be protected. This applies to any "property deposit"—money paid as security against damage or unpaid rent.

What counts as a deposit?

• Traditional security deposits
• Holding deposits that become security deposits
• Any money held as security, whatever you call it

What doesn't need protecting?

• Rent in advance (unless it also acts as security)
• Holding deposits returned or used for first rent
• Deposits for excluded tenancies (lodgers)

The three approved schemes

Three government-approved schemes operate in England: DPS (Deposit Protection Service), TDS (Tenancy Deposit Scheme), and MyDeposits. All offer custodial and insured options.

All schemes provide the same legal protection. Choose based on whether you want custodial (free, they hold money) or insured (fee, you keep money).

Custodial vs insured protection

Custodial protection is free—you transfer the deposit to the scheme. Insured protection costs £20-30/year—you keep the deposit but pay for insurance. Both are equally valid.

Custodial (free)

• Transfer deposit to the scheme
• Scheme manages the money
• Scheme handles returns at end
• No ongoing fees
• Less admin for you

Insured (fee-based)

• You keep the deposit
• Pay annual fee to scheme
• You handle returns
• Money available for your cash flow
• More responsibility

Most landlords use custodial—it's simpler and free. Choose insured only if you specifically need access to the money.

The 30-day deadline

You have exactly 30 days from receiving the deposit to protect it AND serve prescribed information. Miss this deadline and you're non-compliant, even if you protect later.

What the 30 days covers

• Protection: Register with scheme, transfer/insure deposit
• Prescribed information: Serve on all tenants

When does the clock start?

From when you (or your agent) receive the money. If the tenant pays on 1st March, you must complete everything by 31st March.

Late protection

You can protect late, but the period without protection is a breach. Tenants can still claim for that period. Late protection doesn't fix historic non-compliance.

Prescribed information requirements

You must serve prescribed information on every tenant within 30 days. This document (from your scheme) explains how their deposit is protected and how disputes are resolved.

What prescribed information includes

• Which scheme protects the deposit
• Scheme contact details
• Amount of deposit
• Property address
• Landlord details
• How to request deposit return
• Dispute resolution process

How to serve

• Hand delivery with signed receipt
• Recorded delivery post
• Email (if tenant agreed to electronic service)

Serve on ALL tenants individually. If three people are on the tenancy, each needs their own copy.

Penalties for non-compliance

If you fail to protect or serve prescribed information, you cannot serve valid Section 21 notice and tenants can claim 1-3 times the deposit amount through the courts.

Consequences

The compensation claim

Tenants can apply to county court. Courts must award at least 1x the deposit (the deposit itself must also be returned). Courts have discretion to award up to 3x for more serious breaches.

End of tenancy returns

At tenancy end, return the deposit within 10 working days of agreement on deductions. If there's a dispute, use the scheme's free dispute resolution service.

Return process

1. Conduct check-out inventory
2. Compare to check-in condition
3. Identify any deductions (damage, arrears)
4. Propose deductions to tenant in writing
5. Agree split or use dispute resolution
6. Return agreed amount within 10 days

Custodial returns

Both parties log in to scheme and confirm the split. Money released when both agree (or after adjudication).

Insured returns

You return the money directly to the tenant. Keep proof of payment.

Handling deposit disputes

If you can't agree on deductions, use the scheme's Alternative Dispute Resolution (ADR). It's free, independent, and the decision is binding.

ADR process

1. Either party raises dispute with scheme
2. Both submit evidence (inventories, photos, quotes)
3. Adjudicator reviews independently
4. Decision issued (typically 2-4 weeks)
5. Money released per decision

Evidence that wins disputes

• Detailed check-in inventory with photos
• Dated photographs (timestamps visible)
• Check-out inventory and photos
• Quotes or receipts for repair costs
• Correspondence about issues