Deposit protection: your legal responsibilities
Private landlords usually ask new tenants to pay a deposit - a cash lump sum that the landlord holds in case the tenant causes damage or leaves with rent arrears.
By law, all cash deposits taken for new assured shorthold tenancies starting after 6 April 2007 must be protected by a tenancy deposit protection scheme.
It doesn't apply to fixed-term or periodic assured shorthold tenancies already in existence, but it does apply if you give an existing tenant a new fixed-term agreement. Within 14 days of receiving the deposit, landlords must give tenants details of the scheme covering their deposit.
On any new tenancies starting after 6 April 2012, private landlords must protect the deposit and provide tenants with details of the scheme covering their deposit within 30 days by law. It is no longer acceptable to place a deposit into a scheme just before a hearing to consider a claim for non-compliance.
There are two types of scheme:
Insurance-based schemes
Landlords keep the deposit but pay a premium to the scheme provider. At the end of the tenancy, if landlord and tenant agree, the money is returned - either in whole or in part. Any disputed amounts are placed into the scheme until an 'alternative dispute resolution service' (ADR) decides who gets what.
There are two providers of schemes like this:
Custodial schemes
Landlords pay all the deposit into the scheme. At the end of the tenancy, if landlord and tenant agree, they tell the scheme how to pay out the deposit. Any disputed amount will be resolved by an ADR. It's funded from the interest earned from the deposits, so it's free to landlords.