#AskTDS: “What happens if I don’t protect my tenant’s deposit?”

There are so many regulations that apply to landlords, which is why it is important for landlords keep up to date with their legal responsibilities when letting a property.

Tenancy Deposit Protection (TDP) legislation

From 6 April 2007, a key legal requirement for landlords renting out a property in the private sector is Tenancy Deposit Protection (TDP) legislation, where a landlord must use a government approved TDP scheme to register a tenancy deposit for protection.

TDP legislation currently applies to England and Wales where the tenancy is an Assured Shorthold Tenancy (AST).

Protecting the tenancy deposit may seem like a small part of the letting transaction, but it’s a key part of the process that you should not ignore.

Although TDS does not police the legislation, a landlord could be faced with court action, a potential penalty and restrictions which will affect the ability to serve notice for possession, if the requirements are not complied with correctly.

TDP requirements for landlords

Under TDP legislation landlords must register the tenancy deposit for protection and serve the relevant documents within 30 days of it being received.

The tenancy deposit, also known as a security deposit, is the monies paid by the tenants to be held as security against the tenants’ obligations under the terms of the tenancy agreement.

When the tenancy deposit has been protected the landlord must serve some key details, called prescribed information. Landlords must serve on the tenants and any relevant person (someone who pays the deposit on behalf of the tenants) with the most up-to-date prescribed information, within 30 days of receipt of the deposit, along with the TDP scheme leaflet.

TDS helps TDS Insured members comply with this by producing a template to help you ensure you capture all the information required to be served within the prescribed information. In TDS Custodial, we go one step further by auto-populating the prescribed information ready for the you to serve.

It pays to be concise when serving the prescribed information; don’t think that it’s ok to serve the prescribed information to one tenant, it must be served to all tenants and any relevant persons.

When receiving the deposit, landlords must ensure they’ve provided the tenant with:

• the contact details of the landlord or letting agency
• the tenancy address
• the value of the deposit
• the name and contact details of any third party who paid the deposit – who is referred to in legislation as a ‘relevant person’
• the name and contact details of the tenancy deposit protection (TDP) scheme and its dispute resolution service
• reasons for why money may be deducted from the deposit at the end of the tenancy (for example, if a tenant damages the property and the landlord incurs repair costs) in the deposit use clause
• how to claim the deposit back at the end of the tenancy (this may differ depending on which scheme you use)
• what to do if there’s a dispute over the amount of the deposit to be returned at the end of tenancy

As the TDP Legislation has been in place for over 10 years now a landlord needs to understand how they can ensure that their tenants’ deposit is protected.

TDS offers the option of using either an Insured or Custodial deposit scheme, both options, TDS Custodial and TDS Insured, are available for landlords and letting agents

What happens if you don’t do this?

The tenant (or any relevant party to the deposit) could possibly instigate court action if the landlord fails to protect a tenancy deposit correctly. The court will consider whether to direct the landlord to pay the deposit back to the tenant and could issue a penalty of up to three times the value of the deposit as compensation to the tenant.

It pays to get it right first time so as a landlord you can carry on managing your property with confidence.

TDS is always striving to help landlords, agents and tenants understand their rights and responsibilities through blogs and our TDS Academy courses. We speak at numerous industry events across the country and publish magazines, documents and guides to help keep agents, landlords and tenants up to date with any changes.  The TDS Charitable Foundation also provides funding for projects aimed at educating the private rented sector.

For more landlord tips please view our landlord FAQ page.

About TDS:

Tenancy Deposit Scheme (TDS) is a Government-approved scheme for the protection of tenancy deposits; TDS offers both Insured and Custodial protection and also provides fair adjudication for disputes that arise over the tenancy deposits that we protect.

We provide invaluable training in tenancy deposit protection and disputes for agents and landlords through the TDS Academy as well as joining with MOL to provide the Technical Award in Residential Tenancy Deposits.

TDS Insured Scheme: where a TDS member can hold the tenancy deposits as stakeholder during the term of the tenancy.

TDS Custodial Scheme: where TDS hold the deposit for the duration of the tenancy.

TDS Academy: TDS provides property professionals with invaluable training in tenancy deposit protection and tenancy deposit disputes.

TDS Northern Ireland: TDS is Northern Ireland's leading and only not for profit tenancy deposit protection scheme.

TDS can only comment on the process for our scheme, other deposit protection schemes may have a different process/require different steps. Content is correct at the time of writing.

These views are those of the author alone and do not necessarily reflect the view of TDS, its officers and employees.

ARLA|Propertymark: For agents who would like to stay up to date, you can contact Propertymark | ARLA at: join@propertymark.com. By being a member of Propertymark | ARLA you will be eligible for TDS Insured best headline rates.

RLA: If you are a landlord and would like to keep up to date with any changes that may affect you or your responsibilities, you can contact the RLA at: info@rla.org.uk and quote reference: dg715 to receive 25% off your first year's membership.