A Tenant’s guide: what is a Tenancy Deposit?

This article is designed to give tenants looking to rent a property key information on various aspects of letting; this article deals with the Tenancy Deposit, explaining: what it is; what happens at the end of a tenancy; and when money can be deducted from it.

What is a deposit

Many landlords expect a Tenant to pay a deposit when they move into a property. The deposit often equates to at least a months rent and is used as security in case the tenant breaks an obligation in their tenancy and does not make good;  for example if the tenant leaves the property: owing rent; having damaged the property; having removed items; without cleaning the property; and, or, without paying their bills.

Tenancy deposit law

Tenancy deposit law was introduced on 6th April 2007 and provides protection for Tenants by preventing landlords and letting agents from unfairly withholding a deposit. The scheme protects all Assured Shorthold Tenancies in England and Wales (covering most tenancies since 1997).  Tenancy deposit law requires a Landlord or Letting agent to protect the deposit in an approved deposit protection scheme; in May 2012 there were 3 approved schemes:

The TDS is only open to members of approved professional body – like a trade association, for example the Association of Residential Letting Agents.

A Landlord or Letting agent must protect a Tenant’s deposit within 30 days of receiving the deposit. The Landlord must provide the Tenant with the following information about how their deposit is protected:

  • the address of the rented property and the amount of deposit paid;
  • the Landlord’s or Letting agency’s name and contact details;
  • the name and contact details of any third party that has paid the deposit;
  • items or services covered by the deposit;
  • the circumstances under which the Landlord will be able to retain some or all of the deposit; and
  • what to do if there is a dispute over how much deposit should be returned.

In what situation can a  landlord make a claim against a tenant’s deposit

The tenancy agreement sets out the responsibilities of the tenant and in what circumstances a landlord can make a claim against a Tenant’s deposit. You can read more about the Assured Shorthold Tenancy in the article A Tenant’s guide: An Assured Shorthold Tenancy and information on a tenant’s responsibilities in A Tenant’s guide: A Tenant’s responsibilities when letting a property.

What happens at the end of the tenancy?

At the end of the tenancy, the Landlord and Tenant must discuss whether the Landlord will retain any of the Tenant’s deposit. If the Landlord decides not to retain any part of the Tenant’s deposit they will contact the deposit scheme responsible for the deposit and request it pays the deposit back to the Tenant; the Tenant usually does not receive any interest accrued while the deposit has been held by the scheme.

If the Landlord decides to retain all or part of the deposit, they must provide evidence that supports their claim – usually in the form of receipts or quotations.  Usually, the inventory is used to highlight any differences in the condition of a property from the beginning of the tenancy to its condition at the end. The Landlord can only deduct as much as is needed to repair or replace what you have damaged on a ‘like for like’ basis. This means that if a Tenant breaks an old chair, they shouldn’t have to pay for a brand new one – the condition of the item and fair wear and tear must be considered.

If the Tenant owes more than the total deposit the Landlord can take the Tenant to court to recover any outstanding money.  Tenants must not withholding the last month’s rent in case the Landlord refuses to return the deposit, as they are legally liable to pay rent and the Landlord could take you to court to recover it.

What happens if there is a dispute of the amount being claimed

The Tenant must agree to the amount being claimed by the Landlord. If the Tenant disputes the amount being claimed, they can raise a formal dispute.  An alternative dispute resolution (ADR) service, or a formal hearing at a county court will then be used to decide the amount to be retained by the Landlord. If the ADR service or County Court agrees with the Landlord’s claim, the deposit scheme will pay the amount claimed to the Landlord, and pay any remainder to the Tenant. The deposit will remain in the tenancy deposit scheme until a judgement has been made.