Rented Property Deposits: What Landlords & Tenants Need to Know

When letting or renting residential property, handling the tenancy deposit correctly is not just good practice, it is a legal obligation. Failure to comply can result in costly claims, inability to evict under a no-fault route, and reputational risk. In this article we explain:

• what a “tenancy deposit” is
• when it must be protected
• what steps both landlord and tenant should take
• what happens at the end of the tenancy
• what the consequences are for non-compliance

Whether you are a landlord taking a deposit for the first time, or a tenant wanting to know your rights, the Hegarty team provide clear and practical advice.

What is a tenancy deposit?

A “tenancy deposit” is a sum of money paid by the tenant (or someone acting on their behalf) to the landlord or letting agent, as security for performance of the tenant’s obligations under the tenancy, for example paying rent, repairing damage or leaving the property in a good condition. If the tenant meets the conditions at the end of the tenancy, the deposit (or most of it) will be refunded.

For most privately‐rented homes in England and Wales under what is called an “assured shorthold tenancy” (AST), the deposit must be safeguarded in a government-approved scheme.

Why deposit protection matters

The requirement to protect a deposit in a recognised scheme was introduced by the Housing Act 2004 to protect tenants from unfair treatment and to give a clear route for dispute resolution.

Key reasons it matters:

• It preserves the tenant’s deposit money and ensures it is handled properly.
• If a landlord does not protect the deposit or provide the required information, the landlord may be prevented from serving a valid Section 21 of the Housing Act 1988 (“no‐fault”) eviction notice.
• The landlord may face a claim for compensation of one to three times the amount of the deposit.
• It gives tenants confidence that their deposit can be returned (or a fair deduction made) and provides a formal dispute resolution route.

Landlord obligations: what must be done and when

1. Protect the deposit

If the property is let under an assured shorthold tenancy (AST) that began on or after 6 April 2007, the landlord must protect the deposit in a government-approved tenancy deposit protection (TDP) scheme.

There are three main schemes in England & Wales: Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme.

The deposit must be protected within 30 days of receipt (or of the tenancy starting) unless the tenancy falls outside the mandatory protection regime.

2. Provide the prescribed information to the tenant

Within 30 days of the deposit being paid (or the tenancy starting) the landlord must give the tenant stipulated information, including:

• the amount of the deposit
• the address of the rental property
• the name and contact details of the landlord/agent
• the details of the tenancy deposit scheme used (name, contact details, scheme administrator)
• information on how the tenant can apply to get the deposit back
• what the landlord may (lawfully) make deductions for
• the circumstances in which part or all of the deposit may be withheld
• what to do in the event of a dispute.

If any of this information changes, then the landlord must provide updated information within 30 days.

3. Cap on amounts & other restrictions

Under the Tenant Fees Act 2019, the amount of deposit that can be required by a landlord in most compliant new tenancies is capped at generally no more than five weeks’ rent, or six weeks if the annual rent is over £50,000.

4. Return and interest

Although the deposit must be protected, many schemes allow the landlord to keep the deposit during the tenancy (or hold it under custodial protection) and then refund at the end. Some schemes require the payment of interest, for example if the deposit is in a custodial scheme.

5. Keep records & communicate clearly

Good practice also demands that landlords hold documentary evidence: the tenancy agreement, proof of deposit payment, condition reports, correspondence about the deposit etc. Clear communication with the tenant promotes smooth resolution at the end and reduces disputes.

What about tenants? Your rights and what to check

If you are a tenant in England & Wales, here are key things you should check:

• Does your tenancy fall within the mandatory deposit protection regime (i.e., an AST in the private sector)?
• Has your deposit been protected in one of the three approved schemes? You can check this via the scheme provider.
• Has your landlord provided the necessary information within 30 days of your tenancy start/deposit payment? If not, you may have rights for compensation.
• Be aware of the cap on permissible deposit amounts (five or six weeks’ rent). If you paid more, you may challenge this.
• At the end of the tenancy, check your condition report, ask for a final inspection, and keep photographic evidence of the property condition when you leave. This helps if the landlord seeks to deduct from your deposit.

At the end of the tenancy: refunding the deposit

When the tenancy ends, the landlord and tenant should agree how much of the deposit will be returned. Key points:

• The landlord should repay the deposit (or agreed portion) within 10 days of the tenant and landlord agreeing how much will be returned, if the deposit is held via a TDP scheme.
• If there is a dispute (for example the landlord claims damage, unpaid rent or cleaning costs) the deposit will typically remain with the scheme until resolution via dispute resolution service.
• Deductions are only lawful if the tenancy agreement allows them and the landlord can justify the amounts (for example evidence of damage beyond fair wear and tear). Tenants should ask for an itemised breakdown.
• If the landlord fails to repay the deposit or provide information, the tenant may make a claim in the County Court for the return of the deposit and possible compensation.

Consequences of non-compliance by the landlord

Failure to comply with the deposit protection rules can have serious consequences:

• A landlord who does not protect the deposit or provide the prescribed information within the time limits cannot serve a valid Section 21 notice to regain possession of the property under the no-fault route.
• The tenant may apply to the court for compensation of between one and three times the amount of the deposit.
• The landlord may find it harder to recover unpaid rent or damages (a counterclaim or offset may apply).
• From a reputational and business perspective, this may lead to broader liability, additional cost, and loss of trust with future tenants.