Deposit protection schemes: what landlords need to do at the end of a tenancy

What to do with tenants’ deposits at the end of a tenancy.

Landlord Advice

5 November 2018

If you’re a landlord renting your home to a private tenant, you can ask them to pay a deposit at the beginning of their tenancy as added financial protection against damage to the property and unpaid rent.

But do you know within what timeframe you must register a deposit with a government-approved Tenancy Deposit Protection Scheme (TDP)? And do you know what actions are available to you if a tenant owes you more money than the deposit covers?

Read out to find out more about the ins and out of Tenancy Deposit Protection Schemes and how they could help make your life as a landlord a little easier.

What is a Tenancy Deposit Protection Scheme?

Since 2007, all deposits paid by a tenant for an assured shorthold tenancy must be registered with a government-recognised tenancy deposit protection scheme within 30 days of receiving it.

Services like the Deposit Protection Servicemydeposits and the Tenancy Deposit Scheme have all been set up to make sure money isn't kept back illegally, but also so that you can access the money if your tenant has breached the rules of their contract. There are separated TDP schemes in Scotland and Northern Ireland.

As a landlord, it’s your responsibility to provide your tenant with a copy of the deposit protection certificate and information (known as prescribed information) that outlines the details of the chosen scheme and what to do if there’s ever a dispute over the money.

What happens if a landlord protects a deposit late?

If you fail to protect a tenant’s deposit within 30 days, you’ve broken the tenancy deposit protection rules, meaning your tenant could take court action against you to claim compensation – which can amount to one to three times the value of the deposit.

By failing to protect a tenancy deposit, your rights to evict your tenants may also be curtailed.

When can and can’t landlords claim money from a TDP?

As a landlord, you have the right to request money if your tenant:

  • Hasn't met or has broken the rules of their tenancy agreement
  • Damaged your property
  • Stolen or lost items that were in the inventory
  • Didn't pay their rent in full
  • Left the house in a dirty condition

You can't deduct deposit money for:

  • Unpaid bills with the tenant's name on them
  • The costs of re-letting the property
  • Bad behaviour that didn't cause any damage – such as hosting noisy parties
  • General wear and tear

What's the difference between damage and wear and tear?

Wear and tear is normal and happens over time, which is why you can't charge your tenants for it. Common examples are scrapes and scuffs on the walls, worn carpets, and faded curtains.

Damage – whether intentional or accidental – is almost always preventable. Nail polish spills on furniture and holes in the wall from hanging paintings are good examples of damage that landlords can claim for.

Anything you do need to replace must be like-for-like. So, if the tenant damages your mid-range mattress, you can't ask them to pay for a high-end one to replace it.

It’s a good to create a written inventory of all the goods in your rental property at the beginning of a tenancy to help prevent disputes over deposits. Creating an additional inventory when a tenancy comes to an end could be an effective means to check the condition of the items originally listed and if tenants need to replace goods.

Deposit Protection Schemes: what to do at the end of a tenancy

Landlords have ten days from when the tenant leaves your property to give them their deposit back, so try to schedule an inspection as soon as possible after their move-out date. This gives you time to assess any damage and work out a calculation of how much money will cover repairing or replacing items.

You'll need to get in touch with your tenant within that ten-day window and come to an agreement about how much money you'll be returning. If neither party can agree, the money will stay in the TDP until you can get it sorted out.

Most schemes have a free dispute resolution service, working as a mediator between you and your tenant to resolve differences. They get to make the final decision on how much money will be returned to the tenant, so make sure your claim is reasonable in the first place.

What if the tenant owes more than their deposit?

In the rare scenario where the damage or unpaid back rent is higher than the deposit, you have a few options available: use alternative dispute resolution (ADR) from the deposit scheme you protected the deposit with initially or take the tenants to court to cover the rest of the costs.

Tenancy Deposit Protection Schemes are designed to help landlords be more legally compliant and give additional peace of mind if deposits are disputed at the end of a tenancy.

To keep up to speed with the rules, regulations and responsibilities you need to adhere to in your life as a landlord, read our complete guide to being a landlord and how to plan for the unexpected to find out everything you need to know.

Renting out your property can be stressful. Protecting it isn't.

With AXA Landlord Insurance, we make protecting your property simple. In a matter of minutes, you can get up to £10m property owners’ liability cover and protection for up to 10 properties. Now that’s landlord insurance you can count on.