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Deposit protection schemes for renters

Deposit protection schemes for renters

You’ve probably heard of deposit protection schemes, but what exactly are they? Are they a necessity? And is there more than one scheme available? We look into tenancy deposits so that you, whether a tenant or a landlord, know exactly what to expect when your tenancy ends.

Chris King
From the Home team
minute read
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Posted 20 FEBRUARY 2020

What are deposit protection schemes?

A deposit protection scheme is a government-backed measure that’s designed to protect tenants’ deposits and make sure you get back what you’re owed at the end of your lease. 

It doesn’t guarantee full reimbursement if you’ve failed to uphold the criteria set out in your tenancy agreement, by causing damage or allowing the property to fall into disrepair, for example.  

What is the average tenancy deposit in the UK?

In 2018, the average deposit in England and Wales was £1,110. It was £587 in Northern Island and £675 in Scotland. Most deposits are equivalent to one month’s rent, but landlords are entitled to ask for more than that if they want to. 

Is a landlord legally required to place their tenant’s deposit into a deposit protection scheme?

If the tenancy began after 7 April 2007, a landlord is legally required to secure a tenant’s deposit in a deposit protection scheme – within 30 days of receiving it.

Are different schemes available? 

There are currently three schemes available in England and Wales. These are:

  • Deposit Protection Service
  • MyDeposits
  • Tenancy Deposit Scheme (TDP)

Each of these offers two options. You can opt for a custodial scheme, which holds your deposit for free, or you can choose an insured scheme. The latter means that you or the agent hold the deposit yourself and you insure it by way of payment to the scheme. 

The amount you’ll pay for an insured scheme depends on the total cost of the deposit.   

There’s also a new Zero Deposit Scheme available. This is gaining popularity because it offers the same level of protection for landlords as a traditional deposit (six weeks’ worth of rent), but saves tenants thousands of pounds. The only catch is that tenants have to pay for the guarantee with a week’s rent, which is non-refundable. 

*Note that there are separate TDP schemes in Scotland and Northern Ireland.

What happens when the tenant moves out?

When the tenant leaves the property, they’re entitled to receive their deposit back within 10 days of agreeing the final sum with the landlord. That sum will be based on how well they’ve taken care of the property during the tenancy and whether the landlord has to make deductions to cover repairs/replacement.

If there’s a dispute between the tenant and the landlord, the deposit will continue to be protected by the custodial scheme until it is settled. If it’s protected by an insured scheme, it must be given to the TDP scheme until the dispute is resolved. 

How can I make sure I get my deposit back? 

When you sign your tenancy, make sure you understand all the requirements stated within your rental agreement. As long as you stick to these criteria, pay your rent and bills on time, and do your best not to cause any damage to the property (reasonable wear and tear doesn’t count), you’ll be entitled to get your deposit back. 

Do holding deposits need to be protected? 

Any deposit paid before the signing of a rental agreement doesn’t need to be protected. However, the holding deposit will become the official deposit if and when the rental agreement is signed, and needs to be entered into a deposit protection scheme thereafter. 

Insurance for peace of mind

Whether you’re moving in or renting out, make sure you’ve got the level of insurance you need to cover you should something unexpected happen. Compare the Market can help you compare quotes from a range of UK insurance providers, in a matter of minutes. Get a quote now and see if you could save. 

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