A landlord’s guide to deposit protection

For landlords in the UK, protecting a tenant’s deposit correctly isn’t just a legal obligation, it’s an essential part of managing a successful tenancy. Despite deposit protection laws being in place since 2007, many landlords remain unclear about their responsibilities. Here, TDS break down deposit protection for landlords, explain the role of a Tenancy Deposit Scheme, and provide clarity on recent legislative changes, including the Renters’ Reform Bill and Awaab’s Law.

Why do landlords need to protect tenants’ deposits?

If you take a deposit from a tenant under an Assured Shorthold Tenancy (AST) in England or Wales, soon to transition into periodic tenancies when the renters reform bill [SY1] comes into force, you are legally required to protect it using a government-backed Tenancy Deposit Scheme within 30 days of receiving it. This applies to all private landlords, regardless of whether you manage the property yourself or through a letting agent.

Deposit protection was introduced to prevent unfair practices, ensuring that tenants’ money is safeguarded throughout the tenancy and returned fairly at the end. Landlords who fail to protect a deposit correctly could face significant penalties:

• A court may order you to return the deposit in full.
• You could be fined up to three times the deposit amount for non-compliance.

You can check the latest government guidance on deposit protection here.

Which deposit protection scheme should landlords use?

In England and Wales, three government-approved deposit protection schemes exist:

1. Tenancy Deposit Scheme
2. MyDeposits
3. Deposit Protection Service

Each of these schemes offers two types of deposit protection:

• Custodial Scheme: The deposit is held securely by the scheme throughout the tenancy. At the end of the tenancy, the scheme distributes the deposit according to an agreement between the landlord and tenant.
• Insured Scheme: The landlord or letting agent retains the deposit and pays a fee to insure it. This allows them to manage the deposit directly and ensures the tenant’s money remains protected.

The Tenancy Deposit Scheme is a popular choice among landlords due to its excellent support, efficient dispute resolution service, and bespoke offers and discounts though Landlord+

How to properly protect a tenant’s deposit

To make sure you’re meeting all your legal responsibilities as a landlord when it comes to deposit protection, follow these simple steps:

• Register the deposit

Within 30 days of receiving the deposit, you must register it with a government-approved Tenancy Deposit Scheme. This is a mandatory legal requirement, and failing to do so could lead to financial penalties.

• Provide the tenant with prescribed information

Once the deposit is protected, you must give the tenant the prescribed information. This is written confirmation of:

• The name and contact details of the Tenancy Deposit Scheme used.
• The amount of the deposit and the date it was received.
• How the deposit will be returned at the end of the tenancy.
• The dispute resolution process in case of disagreements.

This information must be provided in writing within 30 days. You can find the prescribed information templates here, and the Tenancy Deposit Scheme leaflet here.

• Keep detailed records

Good record-keeping is essential when managing deposits. Ensure that you have:

• A copy of the signed tenancy agreement.
• A detailed inventory report, including photographs, to document the property’s condition at the start of the tenancy.
• Copies of all communications related to deposit deductions.

A well-documented tenancy reduces the likelihood of disputes and provides clear evidence if a disagreement arises.

What do recent law changes mean for landlords?

Landlords should also be aware of recent and upcoming legislative changes that could impact their responsibilities. The Renters’ Rights Bill, anticipated to become law after Easter 2025, introduces significant reforms to the private rented sector in England.

1. Removal of Section 21 ‘No-Fault’ evictions

Currently, Section 21 allows landlords to evict tenants without providing a reason, given appropriate notice. The new legislation will abolish this option, meaning landlords must now have a valid, legally specified reason to regain possession of their property.

• You’ll need to rely on specific grounds outlined in the Section 8 of the Housing Act 1988. These include scenarios like intending to sell the property, moving back in, or misconduct such as rent arrears or property damage.
• Evictions will require substantial evidence to support the claimed grounds. For instance, if you plan to sell, documentation like a sales contract may be necessary.
• Depending on the eviction reason, notice periods may vary. For example, evicting a tenant to sell the property or move in yourself requires a four-month notice period.

2. Transition to Periodic Tenancies

Under the new law, all new Assured Shorthold Tenancies (ASTs) will automatically be periodic, meaning they will roll on a month-by-month basis with no fixed end date. With periodic tenancies, tenants can terminate the tenancy with a minimum of two months’ notice. If you have tenants on a fixed-term contract when the new law takes effect, their tenancy will automatically convert into a periodic tenancy at the end of the fixed term. You don’t need to issue a new agreement, but it’s recommended to review your terms to ensure they align with the new rules.  Any new tenancy agreement must comply with the new periodic tenancy rules and agreement should reflect the rolling nature of the tenancy, allowing tenants to give two months’ notice at any time.

3. Regulation of rent increases

To prevent unexpected rent hikes, the Bill stipulates that rent increases can occur no more than once per year and must follow a structured process. Rent adjustments will require serving a Section 13 notice, and tenants will have the right to challenge increases they deem excessive. Landlords will need to ensure rent levels align with local market rates.

Additional provisions from the Renters Reform Bill

• A new binding ombudsman service will be established to resolve disputes between landlords and tenants without the need for court action.
• Landlords will not be able to choose not to rent their properties to those who receive government benefits, or those who have children.
• Landlords will not be able to object to pets being kept on their property without reasonable justification. A landlord must respond to the tenant’s request to keep a pet within 42 days, however, landlords will be able to ask that the tenant purchases suitable pet insurance to cover any damage to their property.

Read more about the bill in detail here.

Awaab’s Law

Coming into force in October 2025, Awaab’s Law requires landlords to address damp and mould issues within strict timeframes. While aimed primarily at social housing providers, private landlords should also ensure their properties remain free of mould and damp hazards to protect tenants health, and avoid potential disputes over deposits for mould related damage. The law states that social housing landlords must investigate complaints of damp and mould within 14 days, provide tenants with a written summary within 48 hours, and begin repairs within 7 days if hazards are found, with emergency issues requiring action within 24 hours.  Further information on Awaab’s Law can be found here.

TDS have a knowledge-sharing collaboration with DampSmart, aimed to help landlords and tenants gain a clearer understanding of the causes of damp and mould.

About TDS

The Tenancy Deposit Scheme is part of The Dispute Service (TDS), the largest tenancy deposit protection (by value) and resolution service provider in the UK making life easier for tens of thousands of agents, landlords, developers, and millions of tenants and homebuyers. Our award-winning customer service is highly rated on both Trustpilot and Google, and we’re backed by the NRLA. We offer free deposit protection in our Custodial scheme, and the lowest rates for landlords in our Insured scheme.

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