Everything You Should Know About Your Deposit if You’re Renting

Posted 2 September 2019 by Nick Parkhouse

Want to know what happens to your deposit when you rent a home? Here’s your complete guide to Tenancy Deposit Schemes…

If you’re renting your home, then it’s likely that you put down a significant deposit when you moved into the property. According to The Dispute Service (TDS), the average deposit in England and Wales in 2018 was £1,110, in Northern Ireland it was £587 and in Scotland it stood at £675.

For more than a decade in England and Wales, deposits that tenants put down on a rental property have been protected by law. However, new findings from Scotland show that more than 200 landlords have been found in breach of tenancy deposit laws in the last 18 months alone.

Keep reading to find out more about these worrying statistics and how your deposit is protected when you rent a home.

What is a Tenancy Deposit Scheme (TDS) and how does it work?

By law, if you’re renting a property under an Assured Shorthold Tenancy (AST), your landlord must protect your deposit by using an authorised Tenancy Deposit Scheme (TDS).

A landlord must use a TDS even if your deposit is paid by someone else; for example, a rent deposit scheme or your parents.

There are two main objectives of a TDS:

  • To ensure that a tenant's deposit is protected and returned at the end of the tenancy, except when the landlord has a legitimate claim on it
  • To resolve disputes between landlords and tenants outside the courts.

A TDS make sure a tenant gets their deposit back if they:

  • meet the terms of the tenancy agreement
  • don’t damage the property
  • pay the rent and bills.

There are two types of TDS:

  • An insurance TDS where the landlord retains the deposit, but secures it by paying a fee and insurance premiums
  • A custodial TDS where a landlord pays the deposit to the scheme’s administrator, and the scheme holds the deposit.

Under a TDS, a landlord has to comply with the initial requirements of the TDS – including putting the deposit in the scheme and providing the tenant with certain information – within 30 days.

Once a landlord has received the deposit, they have 30 days to tell the tenant:

  • the address of the rented property
  • how much deposit has been paid
  • how the deposit is protected
  • the name and contact details of the Tenancy Deposit Scheme and its dispute resolution service
  • their (or the letting agency’s) name and contact details
  • the name and contact details of any third party who has paid the deposit
  • why they would keep some or all of the deposit
  • how to apply to get the deposit back
  • what to do if they can’t get hold of the landlord at the end of the tenancy
  • what to do if there’s a dispute over the deposit.

If the landlord doesn’t fulfil their obligations, a tenant can apply to court even if the tenancy has ended. The penalty for failing to comply with a TDS can be between one and three times the amount of the deposit.

At the end of the tenancy, the landlord must return the deposit within ten days of the tenant and landlord agreeing how much will be returned.

If a tenant is in a dispute with the landlord, the deposit will be protected in the TDS until the issue is sorted out.

Note that there are separate Tenancy Deposit Schemes in Scotland and Northern Ireland.

More than £185,000 paid out to Scottish tenants as landlords fall foul of law

A new study by SafeDeposits Scotland has revealed that more than 200 landlords across Scotland have been found in breach of a law designed to protect tenants’ deposits in the last 18 months.

Since 2012, landlords in Scotland who take a deposit from their tenant have been required, by law, to lodge the deposit with one of three government-approved schemes within 30 working days of the start of the tenancy. Failure to do so can result in a fine of up to three times the deposit value.

The research by SafeDeposits Scotland has studied decisions made by the First-tier Tribunal for Scotland since it began hearing cases of non-compliance with deposit protection at the end of 2017. It found that £186,657 had been paid out to tenants, the equivalent of more than £900 per case.

Although the law states that landlords can be fined up to three times the deposit value, the average award for the cases studied is 1.31 times the value of the deposit. 

The largest award was made to tenants renting a property in Edinburgh, where the landlord was ordered to pay out more than £3,900. The lowest was £50 for a property in Hamilton.

Victoria Smith, chief operating officer at SafeDeposits Scotland, says: “Deposit protection legislation is designed to protect all parties involved in the private rented sector and costs landlords nothing to comply with. The schemes also offer free and impartial adjudication services to ensure that any deductions from deposits are fair and can be scrutinised.

“We believe that the overwhelming majority of landlords operate within the rules, but the findings from our research into the first 18 months of the First-tier Tribunal demonstrates that there are some out there who don’t. 

"In most of the cases we’ve looked at, the landlord has not acted out of malice, but was either simply unaware of the legislation or forgot, however, that does not reassure tenants or save landlords from fines.”

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