Tenancy deposits


A tenancy deposit is a returnable payment taken by an accommodation provider, and is capped at 5 weeks rent (if the annual property rent is £50,000 or more, then this is capped at 6 weeks rent). The tenancy deposit is taken to compensate the provider in the event that there are any arrears on the rent at the end of the tenancy, or to pay for the cost of repairing unreasonable damage or cleaning at the end of the term of the tenancy. The deposit should not be used to cover the cost of reasonable fair wear and tear. 


Holding deposits


Holding deposits are limited to a maximum of 1 weeks rent and can be charged to a tenant to reserve a property. Upon receipt of a holding deposit:


  • An accommodation provider should stop advertising the property.
  • Providers and tenants have 15 days to enter in to a tenancy agreement (although a different deadline can be agreed in writing).
  • If the tenancy does not go ahead then the deposit must be repaid in full within 7 days of the deadline being reached or the accommodation provider backing out.
  • Repayment does not need to be in full if the tenant backs out of the tenancy agreement themselves, fails right to rent checks, has provided false or misleading information, or where the accommodation provider tries their best to get the information needed but the tenant fails to provide it within the 15 days.
  • If the tenancy does go ahead, the holding deposit can either be returned within 7 days of agreeing the tenancy, or put towards the security deposit (at which point it must be protected) or the first rent installment.

Source: Shelter: holding deposits



Deposit protection


Any tenancy deposit taken in relation to Assured Shorthold Tenancies created after April 6 2007 must be protected with a government authorised deposit protection scheme. The schemes protect the deposit and offer a means to resolve disputes between accommodation providers and tenants in the event of any dispute.


If you charge a holding deposit, then this does not have to be protected. However once a tenancy is agreed, if you convert the holding deposit into tenancy deposit, it must then be protected. The holding deposit would not need to be protected if you plan to deduct the amount from the first rent installment.


The following are government authorised deposit protection schemes:

Deposit Protection Service (DPS)

Tenancy Deposit Scheme (TDS)                            

My Deposits 


As an accommodation provider, you have a legal obligation protect the tenancy deposit with one of the above schemes within 30 days of the deposit being paid to you. You must then supply the tenant with the following information:


  • Amount of deposit.
  • Address deposit relates to.
  • Accommodation provider contact details.
  • Scheme name and contact details.
  • Leaflet on how the scheme works.
  • Repayment procedure.
  • Dispute procedure.
  • What happens if either party cannot be contacted.
  • Details of when all/part of the deposit can be retained.

If you fail to protect the deposit and provide the above detail within 30 days, the tenant may apply to the county court for the deposit to be protected or returned to them. The court also has discretion to award a tenant compensation of up to 3 times the amount of the deposit.



End of tenancy procedure


Following the end of tenancy inspection, you should inform the scheme that is protecting the deposit that the tenancy has come to an end and how much deposit you think should be returned to the tenant. The tenant can choose whether to accept this or to dispute it through the tenancy deposit protection scheme.


If both parties agree on the amount that will be returned, then you must return the deposit to the tenants within 10 days of agreement. If however, you are in a dispute over the amount of deposit to be returned, then it will be protected in the deposit scheme until the issue is resolved.


If an agreement cannot be reached, the tenant has 90 days from the date the tenancy agreement ends to start the alternative dispute resolution (ADR) process operated by the tenancy deposit protection scheme. The ADR will look at the evidence provided by both parties and then make a final decision on how much deposit is to be repaid to the tenant. If either you or the tenant do not agree to use the ADR process then the dispute must usually be resolved by the county court. In the case of a dispute, the deposit will be returned within 10 days of the scheme being notified of the ADR or county court's decision.