Category: Deposit Protection

So, who is really responsible for securing the Tenant’s deposit into the deposit protection scheme? Is it the responsibility of the Landlord or the letting agent? The answer should really depend on whether the Landlord trusts the letting agent. Of course, it should be taken into consideration if the Landlord is using a letting agent. In case there is no letting agent involved the responsibility of protecting the deposit automatically falls into the Landlord’s hands.

Making Sure that the Deposit is Secured

Do you trust your letting agent? Are you certain that they are doing what they are supposed to be doing? Do you think that your agent is securing the deposits into the lawful tenancy deposit protections scheme?

Do you know what will happen in case your letting agent fails to secure the deposit? Do you have any idea that you could be involved in a heated argument once your Tenant has discovered that their deposit is not properly protected?

If you, as the landlord, has no common sense to make sure or check that your tenant’s deposit has been properly secured, then you have failed to do your job. It does not matter if the letting agent was bad enough to ignore securing the deposit. In the end, it is your fault as a landlord that the deposit has not been secured.

So, basically, whether you use a letting agent or not, failure to secure the deposit means big trouble for you. How do you avoid that bad result? By being smart enough to check the contract between you and the letting agent.

If the contract states that the letting agent is not tasked to protect the Tenant’s deposit, then you have full responsibility to secure the deposit. This means that the letting agent should pass the deposit over to you so that you can secure it within the allowed 30 days after they received it from the Tenants. You have to understand that it is your responsibility to make sure that the agent passes the deposit to you.

If in case the contract between you and the letting agent specifies that the letting agent has full responsibility of securing the Tenant’s deposit, then all liabilities fall into the hands of the agent if they fail to protect the deposit.

If you suspect that your agent failed to secure the deposit, then you must act fast. Your Tenant could pursue you and then you will have to face complaints. Of course, you should also pursue your letting agent.

It is always better to avoid getting into those complicated complaints and cases. The best way to do that is to be vigilant with your transactions. Always check with your letting agent so that you know if the deposit has been secured.

You have the responsibility to protect that deposit even if the task is supposed to be done by the letting agent. You answer to your Tenant and your letting agent answer to you. Do not let anything to go wrong, or else you will be facing a case while pursuing your letting agent.

Since 6 April 2007, if you rent out a property under an Assured Shorthold Tenancy you are obliged to place your tenants’ deposit in a Tenancy Deposit Protection (TDP) Scheme. This article will explain what a TDP Scheme is, where you can find one, what your obligations are and who is responsible for the deposit if you are using a letting agent.

What is a TDP Scheme, and where can I find one?

Simply put, a TDP Scheme is a government-backed company which either protects or holds your tenants’ deposits and ensures they are returned at the end of the tenancy, unless you are in a dispute with the tenant. There are different types of scheme: a Custodial Scheme is one where you pay the deposit to the company and they will hold it until the tenancy comes to an end, while with an Insured Scheme you retain the deposit and pay a fee for it to be protected.

There are currently three TDP Schemes backed by government: Deposit Protection Service, MyDeposit and Tenancy Deposit Scheme. These Schemes also offer a dispute resolution service in the event of a disagreement over how much of the deposit is to be returned.

What are my obligations?

You must protect your tenants’ deposit within 30 days of the start of the tenancy. If you are given a ‘holding’ deposit you do not need to start protecting it until after the tenancy has officially started. Within those 30 days, you must also supply your tenants with the following information:

• The address of the property;
• The amount of their deposit;
• How the deposit is protected, including the name and contact details of the TDP scheme and their dispute resolution service;
• Your name and contact details, or those of your letting agent where applicable;
• The name and contact details of the third party who paid the deposit, if applicable;
• Reasons why you may keep some or all of the deposit, e.g. in the event of damage repaired at your cost;
• How to get their deposit back at the end of the tenancy, and what to do in the event of a dispute over how much is to be paid back; and
• What to do if they are unable to contact you at the end of the tenancy.

I’m using a letting agent – who is responsible for protecting and returning the deposit?

According to guidance on the MyDeposit website, even if you choose to instruct a letting agent to protect your tenants’ deposit you are still ultimately responsible for the protection and return of the deposit. Therefore if your letting agent ceases trading, becomes insolvent or acts fraudulently you will be liable for the return of the deposit. This doesn’t necessarily mean you should avoid using a letting agent for this purpose, but that you should be careful to use a reputable agent and make sure that they use a segregated bank account to keep the deposit secure. You should also ensure that your agent passes on all required information to your tenants.

For further information on TDP Schemes, the Gov.uk website has a short guide for landlords.

It is a legal obligation that, if you take a deposit from your tenant, it is placed in a government authorized Deposit Protection Scheme within 30 days of receipt. This has been in force since 2007 and now applies to all tenancies regardless of when they started.

You also need to inform your tenants fully of the details of their deposit protection within 30 days of receipt.

If you do not protect your tenant’s deposit, there can be serious consequences. Your tenants could take you to the county court, which could order you to repay the deposit or to place it in a scheme within 14 days.

The court can also order you to pay damages of up to three times the amount of the deposit, and can decide that the tenants do not need to move at the end of the tenancy.
You also cannot serve a Section 21 Notice to regain possession of your property at the end of a tenancy if you have not complied with Tenancy Deposit Protection (TDP) Scheme legislation. In this situation, you would have to show legitimate grounds for evicting your tenant(s) with a Section 8 Notice.
If you have failed to protect your tenant’s deposit within 30 days, there is no way of rectifying this mistake which will fully protect you from legal consequences.

The wisest option in this situation would be to pay the deposit into a TDP scheme as soon as possible. This would still leave you liable to court action, but a judge may decide to be lenient in light of the fact that you did try to fix the problem and, therefore, lessen the damages to be paid.

It is necessary to note that if you are using a letting agent and they fail to protect your tenant’s deposit, as a landlord you are still responsible. This is highlighted by the case of a landlord who had given his tenant’s deposit to a letting agent, but when it came to the end of the tenancy, the agent no longer existed.In this case, the landlord was held liable and ordered to pay three times the original deposit (£1950) in damages plus costs.

Therefore, you should make sure that your letting agent is part of a regulated Client Money Protection Scheme, and insist that they give you details of the TDP Scheme they have used within 30 days, just as they are supposed to do with the tenants.