Before you move into a rental property, it's highly likely that your landlord or letting agent will require you to pay a deposit.
The deposit – which is usually one or two months’ rent, covers the tenant meeting the terms of the tenancy agreement, damage and rental payments.
Since 2007, it has been a mandatory requirement for all deposits taken on an Assured Shorthold Tenancy (the most common type of tenancy) to be protected with one of three Government-approved tenancy deposit protection schemes.
How do I know if my deposit is protected?
Once your landlord (or their letting agent) has received your deposit, they are legally required to place it with an approved tenancy deposit protection scheme for the duration of your tenancy.
They must do this within 30 days of receiving your deposit. It is then down to them to provide you with information regarding where your deposit has been protected during the same period.
If you do not receive communication from your landlord or agent on which scheme your deposit has been placed with, you can ask them and they should be able to tell you.
If you do not receive information about which scheme your deposit has been protected with, or if your deposit has not been protected, within 30 days, you are eligible to apply to a County Court for compensation which can be paid at up to three times the deposit's original value.
The deposit protection schemes
There are three tenancy deposit protection schemes which have been approved by the Government. Depending on which organisation your landlord or letting agent uses, your deposit may be placed with any of these three schemes:
The schemes offer landlords and agents insurance or custodial-based options. The insurance-based option means the agent or landlord actually keeps hold of the deposit, paying a protection fee to their chosen scheme. Meanwhile, the custodial alternative means your deposit is paid directly to the chosen protection scheme and held in a secure bank account. In both cases your deposit will be protected for the duration of your tenancy. Since 2016, all three schemes have offered both custodial and insurance-based options.
According to figures from the Department for Communities and Local Government, there were - as of the end of March 2016 - 3.42 million deposits registered across the three schemes, totalling a value of £3.56 billion.
In March 2008, just 924,181 deposits were protected at an overall value of £885 million.
Getting your deposit back at the end of a tenancy
At the end of the tenancy, the landlord or agent is required to return your deposit within 10 days. This depends on whether it has been agreed what sum will be repaid to you.
If you don't receive your deposit back within 10 days, you can contact the scheme it was protected with and they will order your landlord or agent to repay it.
The landlord is entitled to make deductions from your deposit for damage, missing items, unpaid rent and cleaning costs.
If, however, you don't agree with any deductions proposed by the landlord then you can challenge them. If you can't come to an agreement, it can then be referred to the relevant deposit protection scheme's Alternative Dispute Resolution team which will investigate the case and make a final decision on if and how much should be returned to you.
Why is deposit protection important?
According to the latest English Housing Survey, the private rental sector now accounts for 20% of all households - 38% of which have dependent children.
Therefore, it's vital that tenants have the peace of mind that their deposit is in a safe place for the duration of their tenancy. If the agent or landlord that you are dealing with goes bankrupt for example, your deposit will be safe guarded if it has been protected.
What's more, mandatory deposit protection has made the system fairer and more transparent for all parties. It allows tenants to challenge deductions fairly to stop deposits being unfairly withheld at the end of a tenancy term.
Additionally, it’s worth noting that another way you can help improve your chances of easily receiving your full deposit back at the end of a contract is to ensure that the condition of the property is left in a clean, habitable state. Landlords often must earmark a portion of a deposit to pay for a deep clean of a property following a tenant’s exit – this goes beyond a quick tidy and a vacuum. It might be worth purchasing an oven cleaning kit, some carpet shampoo and some window cleaner to bring the property back to its former state before you moved in.
The Alternative Dispute Resolution system that goes hand in hand with deposit protection provides a fair and categorical way of handling disputes, helping to make sure that neither tenant, landlord or letting agent are left out of pocket at the end of a tenancy.