Deposit Protection Scheme (DPS) Compliance Guide

If you’re a landlord renting out a property with an assured shorthold tenancy that kicked off after April 6th 2007, you have to put your tenant’s deposit in a tenancy deposit protection scheme by law.

In this guide, we’ll walk you through everything you need to know about staying compliant. We’ll cover:

• What a tenancy deposit scheme is; 

• Why deposit protection schemes were introduced; 

• Deposit protection scheme rules;

• What information landlords need to give tenants about DPS schemes;

• Which tenancy deposits should be protected;

• How to properly return a deposit at the end of tenancy; 

• Holding deposits and deposit protection schemes;

• Penalties for non-compliance with deposit protection rules; 

• Time limits landlords need to stick to in order to stay compliant;

• Tenancy renewals and DPS compliance. 

What is a tenancy deposit scheme? 

A tenancy deposit scheme is a government backed scheme that securely holds a deposit and makes sure tenants can get them back quickly if they:

1. Stick to the terms of the tenancy agreement; 

2. Treat the property with respect; 

3. Keep up with the rent and bills. 

Why were deposit protection schemes introduced? 

About twenty years ago, there was a major worry that some landlords were holding onto their tenant’s hard-earned deposit for no good reason. So, in 2004, the Housing Act was brought in to fix things up. This legislation had two big goals: 

1. Protect deposits; 

2. Settle deposit disputes between landlords and tenants fairly. 

Deposit protection scheme compliance rules

There are two key rules landlords must comply with in relation to deposit protection schemes: 

1. They have to put the deposit into an authorised scheme within 30 days of getting it;

2. They have to give tenants certain information (Prescribed Information) explaining where the deposit is kept and how the scheme works within 30 days. 

Deposit protection schemes In England and Wales

As mentioned, deposit protection schemes are government backed. Therefore, there are only a set few in which a landlord can use to protect a tenant’s deposit. These are: 

• Deposit Protection Service (DPS)

• MyDeposits 

• Tenancy Deposit Scheme

There are 2 different types of deposit protection schemes: 

Custodial Tenancy Deposit Schemes

Custodial tenancy deposit schemes hold the deposit for free and release it back to the tenant when the tenancy comes to an end. 

Insured Tenancy Deposit Schemes 

In insured deposit schemes a landlord or agent keeps hold of the deposit but pays the scheme to insure it. 

What information do landlords need to give tenants about deposit protection schemes? 

When tenants hand over a deposit, within 30 days landlords have to share some important information with them, including: 

• The address of the property they’re renting; 

• How much deposit they’ve paid; 

• How their deposit is protected; 

• The name and contact information for the tenancy deposit protection scheme and its dispute resolution service; 

• The landlord’s name and how to get in touch with them or the letting agent; 

• The name and contact information of the third party who paid the deposit (if applicable); 

• Under what circumstances a landlord might hold on to all or some of the deposit (i.e. for damages);

• How tenants can get their deposit back at the end of the tenancy; 

• What to do if they can’t contact the landlord at the end of the tenancy;

• What steps they should take in the event of a deposit dispute. 

Which tenancy deposits should be protected? 

If you’re in England or Wales, and you’re a landlord dealing with an assured shorthold tenancy, you’ve got to make sure the deposit is protected in a tenancy deposit scheme. This applies even if someone else has paid the deposit on behalf of a tenant. 

Tenancy deposits from lodgers or students don’t have to be put in a deposit protection scheme. Nor do they have to be if tenants rent privately and have an assured or protected tenancy. 

Returning deposits at the end of a tenancy 

If you agree how much should be returned 

At the end of a tenancy, landlords and tenants should agree how much of the deposit is being returned and the amount must be returned within 10 days. 

If there is a deposit dispute 

But, if landlords and tenants don’t agree on how much of the deposit should be returned, it should be held in the deposit protection scheme until the dispute is sorted out. 

If a landlord has used an ‘insured’ deposit scheme, at this point they have to give the deposit to the scheme, who will hold it until an agreement is reached. 

Should holding deposits be put into a deposit protection scheme? 

If a prospective tenant gives a landlord a holding deposit (that’s money to reserve a property before a tenancy agreement is signed), landlords don’t need to protect it. 

As soon as they officially become tenants, that holding deposit transforms into a regular deposit, and it should be protected within 30 days, as well as all the information communicated to the tenant.

What is the penalty for non compliance with tenancy deposit protection legislation? 

If a landlord doesn’t protect a tenant’s deposit, the tenant can apply to a county court. 

In extreme cases, a court can order a landlord who hasn’t complied with the rules of protecting a tenant’s deposit to pay up to three times the amount of the original deposit. 

They can also rule that tenants don’t have to leave the property at the end of the tenancy. 

In other cases, a court may rule that a landlord should return the deposit in full to the tenant in a set time frame, or put the deposit into the bank account of a tenancy deposit scheme within 14 days.

Time limits for tenancy deposit protection compliance 

If a landlord or their agent don’t comply with the rules around time limits, they can get hit with financial penalties and in some cases may not be able to use a Section 21 notice to end the tenancy. 

These time limits depend on when the landlord was given the deposit. 

Deposits received on or after 6th April 2012

For deposits received on or after this date, landlords have to protect the deposit and share the required information within 30 days. 

If they don’t, a tenant can make a section 214 claim and potentially get compensations that’s one to three times the value of the deposit. 

In most cases, a landlord can’t use a section 21 notice to end the tenancy, either. 

Deposits received between 6th April 2007 and 5th April 2012

Between 6th April 2007 and 5th April 2012, landlords or agents had to protect a deposit within 14 days of receiving it, as well as share the necessary information. 

For shorthold tenancies that were already rolling by 6th April 2012, landlords had until 6th May 2012 to protect a deposit if they hadn’t already.

If they didn’t do this they can only send out a section 21 notice if they hand back the deposit beforehand. 

Deposits received before 6th April 2007 

Even though the law about protecting tenancy deposits kicked in on 6th April 2007, assured shorthold tenancies that started before that date are still covered. 

For a fixed term tenancy before 6th April 2007 that turned into a statutory periodic tenancy on or after that date, if a landlord didn’t comply with the rules a tenancy can make a section 214 claim and the landlord can’t use a section 21 notice to end the tenancy in most cases.

If the fixed-term tenancy became a statutory periodic tenancy before 6th April 2007 and it hasn’t been renewed since, section 214 claims may not apply, although in most cases a landlord cannot use a section 21 notice to end the tenancy.

Tenancy renewals and DPS compliance 

A landlord doesn’t have to keep re-sharing the information about tenancy deposit protection when a tenancy is directly or indirectly renewed, providing the landlord and the tenants are the same at the start of the new tenancy and they’re renting the same property. 

Get help from our landlord and tenant solicitors today

Our Landlord and Tenant lawyers know their stuff when it comes to renting and the Landlord and Tenant act.

It’s really important that landlord’s take their responsibilities to tenants and deposit protection scheme compliance seriously by putting a tenant’s deposit into a government-backed scheme and communicating the relevant information to them about it within 30 days. 

If you’re a landlord and you’re not sure about your responsibilities, our solicitors can fill you in and help you in the event of a deposit dispute or other issue between you and a tenant.

Get a free case assessment today to find out how our expert lawyers and solicitors can help you sort things out quickly and affordably.