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The Essential Guide to Tenancy Deposits
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1. What is a Deposit?
Essentially a deposit is money paid to someone as security.
Sofar as tenancy deposits are concerned, the Housing Act 2004 (which is the act which set up the tenancy deposit schemes) defines ‘tenancy deposit’ in section 212 (8) as follows:
“tenancy deposit”, in relation to an assured tenancy, means any money intended to be held (by the landlord or otherwise) as security for—
(a) the performance of any obligations of the tenant, or
(b) the discharge of any liability of his,
arising under or in connection with the tenancy.
Here are some other points about tenancy deposits:
- The money always belongs to you, the tenant
- If your landlord does not have any valid claim, the money should be paid back to you at the end of the tenancy
- Claims by your landlord must relate to your obligations under the tenancy
Note that deposits work in a similar way if they are paid in respect of a residential license or lodger agreement.
In this article we refer to landlords – the same rules apply when your landlord is using a letting agent.
2. The Need for a Written Agreement
For landlords to be able to claim against a deposit there needs to be a written tenancy agreement. Or, where appropriate, a licence or lodger agreement.
The reason for this is that, because the deposit is your money, your landlord cannot claim against it unless you have given permission. This is normally done via a clause in your agreement.
So when you sign the agreement, one of the things you are agreeing to (assuming your agreement contains deposit clauses) is the right for your landlord to make deductions from your deposit money.
If your landlord has not given you a written agreement (or if your agreement does not have any deposit clauses) in most cases your landlord will be unable to claim off your deposit.
One of the top reasons why deposit adjudicators throw out landlord’s claims for deductions is that they do not have any tenancy agreement!
3. Limits on the deposit your landlord can take
There are now strict limits, in England, on the deposit money which landlords can ask tenants to pay. This is
- Up to five times the weekly rent, or
- Up to six times the weekly rent if the annual rent is £50,000 or more
If more than this is taken, you are entitled to ask for the extra money to be paid back to you. If this is not done:
- you can bring a claim in the First Tier Tribunal for the extra money
- Your landlord will not be able to serve a valid possession notice on you until the excess money is paid back to you
- Your landlord could be prosecuted by the Local Authority or have to pay a penalty charge.
Note that this rule is not just limited to assured tenancies, but also applies to deposits paid for other tenancies and by licensees and lodgers.
Use our online calculator below to check that your landlord or his agent has charged your the correct deposit sum:
4. The Tenancy Deposit Scheme
The Housing Act 2004 is the legislation which set up the tenancy deposit schemes, which were finally introduced in April 2007.
The main elements are:
- Only landlords of Assured Tenancies have to protect deposits in a scheme
- The deposit money must be protected with a government authorised tenancy deposit scheme within 30 days of payment of the money
- The landlord must then serve ‘prescribed information’ on the tenant, also within 30 days of payment of the money
- If this is not done then penalties apply (see below)
So if your tenancy is not an assured tenancy, or if you have a license or are a lodger – your landlord does not have to protect your deposit in a scheme.
5. The Government Authorised Schemes
There are three organisations which have been authorised by the government to run tenancy deposit schemes. These are:
All three websites have extensive information to help both landlords and tenants, plus they all have a telephone helpline.
They also have pages where you can check to see if your deposit has been protected.
There are two types of scheme:
- The Custodial Scheme, and
- Insurance based schemes
It is up to the landlord (or his agent) to decide which scheme is used. Here is a brief explanation:
Custodial Schemes
- The money is held by the scheme
- The scheme is free for the landlord to use
- There will be a delay at the end of the tenancy before the scheme pays the money back to you
Insurance based schemes
- The money is held by the landlord
- The landlord has to pay a fee to the scheme
- The landlord will be able to pay the money back to you quicker at the end of the tenancy
- If the landlord runs off with the money, you can claim it back from the scheme so you are not at risk
6. Prescribed Information
As well as protecting your deposit with a scheme, your landlord must also serve prescribed information on you.
Note that there is no special form for this – it is the information which is prescribed, not the form. The information which your landlord must give is set out in section 2 of The Housing (Tenancy Deposits) (Prescribed Information) Order 2007.
Here are some important points about prescribed information:
- It must be served within 30 days of receipt of the deposit money by your landlord or his agent
- If the deposit is paid to the agent, it is normally the agent which provides the prescribed information
- The form must be signed by either the landlord or his agent
- ALL of the prescribed information must be provided or the landlord or agent will be in breach
Often a landlord or agent will serve on you a copy of the deposit protection certificate and the information leaflet provided by their scheme.
This will contain most of the prescribed information. However under section 2(1)(g)(vi) of the regulations the landlord also needs to notify you of:
the circumstances when all or part of the deposit may be retained by the landlord, by reference to the terms of the tenancy
Which means he needs to tell you the clause number in your tenancy agreement which deals with deductions from the deposit. This will not be in the certificate or leaflet so a landlord or agent who only serves these will be in breach. Watch out for this!
7. Disputed claims
For most tenancies there are no deductions made by the landlord and the full deposit is paid back to the tenants.
However if the landlord decides to make a deduction – what happens if you do not agree with this?
1. Negotiate with your landlord
You should always try to reach an agreement with your landlord (or his agent if the landlord is using an agent). Note that they cannot claim anything they like, they must be able to prove that (for example) any damage was done by you – and they cannot claim for damage which is due to ‘fair wear and tear’.
Landlords must justify the sums they are claiming and you are entitled to ask for proof, such as a receipt for any replacement items or repair work done.
2. If you cannot reach agreement, refer the claim to adjudication
All three schemes operate a free adjudication scheme which both landlords and tenants can use if there is a dispute about deductions from the deposit which cannot be resolved.
You will find a lot of guidance on your deposit scheme website. Make sure that you comply with any time limits.
3 Or bring a county court claim
Occasionally it may be better for you to go to court to claim back your deposit rather than use the free adjudication scheme.
For example, if you have withheld money from the rent in order to get essential repair work done when your landlord has refused to do it.
Tenants do have a legal ‘right to set-off’ if they have followed the proper procedure. However, tenancy deposit adjudicators are not authorised to deal with this sort of dispute and will normally award the money to your landlord as you have not paid the rent.
So if you have made a deduction from your rent for a valid reason you are normally better off using the courts rather than the free adjudication schemes.
8. If your landlord fails to comply
Assuming you have an assured tenancy, your landlord must protect your deposit within 30 days of payment of the money to them, or to their agent AND serve the prescribed information.
If your landlords fails to protect your deposit
- Any possession notice served on you will be invalid, and
- You can go to court and claim a penalty fine of up to three times the deposit sum
If your landlord refunds the deposit money to you:
- He will then be able to serve a valid possession notice, but
- You will still be entitled to go to court and claim the penalty
If your landlord fails to serve the prescribed information:
- Any possession notice served on you will be invalid, and
- You can go to court and claim a penalty fine of up to three times the deposit sum
If the prescribed information notice is served on you late or if your landlord refunds the deposit money to you:
- Your landlord will then be able to serve a valid possession notice, but
- You will still be entitled to go to court and claim the penalty
Note that if your deposit money was paid to the letting agent, you can sue the letting agent for the penalty as well as the landlord.
Claiming the penalty
This procedure is quite complicated – you have to use a special court proceedure called the Part 8 Procedure which is not a straightforward procedure to use.
Basic guidance is given on the Shelter website here. However you are probably best advised to find a firm of solicitors who are willing to act for you on a no win no fee basis.
This is the end of this article.
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