If you’re a landlord in the UK and you receive a deposit for renting out your property, chances are you will need to put that deposit into a tenancy deposit scheme. This is a legal requirement, designed to protect the tenants’ money and make any disputes easier to resolve, so it’s important that you follow the regulations carefully. Want to learn more? Here’s everything you need to know about tenancy deposit schemes.
What is a tenancy deposit scheme?
A tenancy deposit scheme, also known as a TDP, is a not-for-profit, government-approved service that protects the deposit a tenant pays when they rent out a property. Essentially, the scheme looks after the deposit for the duration of the tenancy, and it can do this in one of two ways: the ‘custodial’ option means the TDP company holds the deposit, while the ‘insured’ option lets the landlord keep the deposit in return for a regular fee. When the tenancy comes to an end, the landlord and tenant then agree on how the deposit will be divided up, and the money is released from the scheme.
What are my legal obligations?
If you are letting a property on an Assured Shorthold Tenancy (i.e. the most typical kind of rental agreement) then you are legally obliged to put your tenant’s deposit into a recognised tenancy deposit scheme (even if it is paid for by a third party) and provide your tenant with the ‘prescribed information’ about the scheme you have used. If you do not do this within 30 days of receiving the deposit, you could be fined up to three times the amount of the deposit, and it could make it more difficult for you to remove the tenant from the property. It’s important to note that these rules don’t apply to ‘holding’ deposits (i.e. a deposit paid to hold the property in reserve, before an official tenancy agreement is signed), or to any rental agreement that is not an Assured Shorthold Tenancy.
How do I join?
There are three government-backed TDPs you can use: the Deposit Protection Service, My Deposits and the Tenancy Deposit Scheme. Each of these companies offer both insured and custodial options, and they will guide you through all the legal requirements of the process, including providing the tenant with the prescribed information. The custodial option is usually free to use, so protecting your tenant’s deposit shouldn’t leave you out of pocket.
What happens when the tenant moves out?
Keeping the deposit in a protection scheme means that, when the tenancy comes to an end, the money can only be accessed when both landlord and tenant agree on how it will be divided up (e.g. if there are any damage costs or unpaid bills to deduct). If there’s a dispute, the TDP company will provide a free, impartial resolution service to help you reach an agreement as soon as possible. Once the division of the deposit has been decided, you will then have 10 days to return the agreed-upon amount to the tenant.
Protecting a deposit needn’t be stressful, but if you need help with letting out a property in Bristol, please contact Gough Quarters for more advice.