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

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

Debbie Davies | 8 June 2018

This week, Debbie Davies, Assistant Director of Business Development at Tenancy Deposit Scheme (TDS), answers landlord’s question; “What happens if I don’t protect my tenant’s deposit?”

With new regulations regularly introduced for landlords to adhere to, it is important landlords keep up to date with their responsibilities. A key legal requirement of any landlord renting out a property in the private sector is the requirement to use a government-backed tenancy deposit protection (TDP) scheme. 

Tenancy deposit protection may seem like a small part of letting a property but it’s part of the process that you should really not ignore. Although TDS does not police the legislation, you may find yourself faced with court action, fines and also restrictions when serving notices if you do not comply.

Tenancy deposit protection requirements apply to monies received by landlords or agents on any Assured Shorthold Tenancies (ASTs), to be held as security in the event that a tenant does not comply with their obligations.

Legislation making deposit protection mandatory has been in place for over a decade and offers the option of using either an Insured or Custodial deposit protection scheme. TDS offers customers both options: TDS Custodial and TDS Insured (find out more about the difference between them here). 

A common mistake that landlords make when protecting the tenants deposit is to think that they have 30 working days to register it or that the 30 day timeframe to protect the deposit starts once the funds have cleared in their account In fact, the landlord or agent must protect the deposit within 30 calendar days of receipt of the deposit (the time the tenant hands over the deposit either in cash, cheque or makes the debit card payment).

Another area of confusion is over the date the landlord must serve the prescribed information.  Landlords must provide tenants with the most up-to-date prescribed information as set out in the Housing (Tenancy Deposits (Prescribed Information) Order 2007) within 30 days of receipt of the deposit in line with the protection of the deposit. 

TDS helps landlords comply with this by, in the TDS Insured scheme, producing a template of 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 landlord to serve.

There are further misconceptions when it comes to prescribed information; don’t think that it’s ok to serve the prescribed information to one tenant – the key here is that it has to be served to all tenants and relevant persons that have a vested interest in the deposit..  This could be the person who paid the deposit on the tenant’s behalf, such as a friend or relative.

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

What happens if you don’t do this?

The tenant (or any relevant party to the deposit) can take a landlord who fails to protect a deposit to court. The court can make the order that the deposit is protected or order for it to be repaid it to the tenant. The court can also issue fines of up to three times the value of the deposit as compensation.

One other thing to be aware of is that if a deposit hasn’t been protected correctly, landlords cannot rely on a Section 21 notice to end the tenancy and regain possession of it (under section 21 of the Housing Act 1988). The landlord cannot serve a Section 21 notice until the deposit has been repaid or after any court case about the deposit has ended.  

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.

About the author

Debbie DaviesDebbie Davies joined TDS in July 2017 as the Assistant Director of Business Development.  She has an extensive background in the property industry with over 18 years’ experience in residential lettings. 

Debbie brings her passion for raising standards in the lettings industry into her role and is responsible for the digital marketing, advertising, communications and events management for TDS with a firm focus on business development across the TDS brand including TDS England & Wales, TDS Northern Ireland, TDS Academy and TDS Charitable Foundation.

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 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.