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Tenancy deposit protection schemes - when to use them

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Tenancy deposit protection (TDP) schemes ensure that money paid by tenants (as deposits) is kept safe. But what types of tenancy agreements are covered by TDP schemes and what do landlords and tenants need to do to use them.

Tenancy deposit protection (TDP) schemes guarantee that tenants will get their deposits back at the end of the tenancy, if they meet the terms of the tenancy agreement and do not damage the property. Landlords must protect their tenants' deposits using a TDP scheme if they have let the property on an assured shorthold tenancy (AST) which started after 6 April 2007.

If these conditions don't apply - for example, because you live in the property with your tenant - you do not have to protect your tenants' deposits. However, it is still good practice to do so.

Landlords or agents must use one of the three approved TDP schemes to protect tenants' deposits where these conditions apply. If any other scheme is used, deposits are not protected in law. The three approved schemes are:

  • Deposit Protection Service (DPS)
  • MyDeposits
  • Tenancy Deposit Scheme (TDS)

If you don't protect your tenants' deposits when required to, your tenants can take you to court and you may have to repay them their deposit plus three times the amount of their deposit. You will also be unable to seek possession of your property in certain circumstances.

The schemes:

  • encourage landlords and tenants to draw up clear tenancy agreements
  • provide a free service to resolve disputes

TDP schemes do not cover holding deposits. Tenants can pay you holding deposits before they have signed a rental agreement. You are not required to protect a holding deposit with a scheme before someone becomes your tenant. However, once they are your tenant the holding deposit becomes a deposit which must be protected with a scheme.

Protecting deposits by student tenants

If your tenants are students, you must protect their deposits using a TDP scheme if:

  • they have an assured shorthold tenancy
  • you received their full deposits on or after 6 April 2007

You must protect students' or any other tenants' deposits even if they were paid by someone else - for example, their parents.

Protecting deposits made by a third party

If a tenant's deposit is paid by someone else - eg through a rent deposit scheme - you must still use a TDP scheme.

You should ask the tenant and third party what relationship they are to each other and find out how much the third party wants to be involved in the process. For example, the deposit scheme administrator needs to know if the third party wants the deposit returned directly to them.

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