Tenancy Deposit Schemes

Letting a property can be financially worthwhile, and in today’s property market renting is becoming the favoured option for an increasing number of people. The latest development is the introduction of Tenancy Deposit Schemes.


If you are considering becoming a landlord or tenant, it is more important than ever to take expert legal advice before proceeding. Here are answers to some of the frequently asked questions about the new system to help you make an informed decision:

When did TDS’s come into effect?

Tenancy Deposit Schemes (TDSs) became compulsory under the Housing Act 2004 for all residential Assured Shorthold Tenancies created on or after 6th April 2007.

What are they for?

To protect a tenant’s deposit, and to resolve disputes before they reach the courts.

Do I have a choice?

Landlords can choose between a ‘custodial’ or an ‘insurance’ TDS. Under a custodial TDS the landlord is required to pay its tenant’s deposit to a Scheme Administrator within 14 days of receipt from the tenant who holds the deposit until the end of the tenancy. Under an insurance TDS the landlord retains the deposit but secures it by paying a fee and insurance premium to the Scheme Administrator. The Scheme Administrator will use the premiums to pay the tenant should the landlord default on the deposit.

Are there any other rules I should know about?

For landlords there are several new rules. ‘Prescribed information’ has to be given to both the tenant and to any relevant person – for example, a parent who pays rent on a property to be occupied by a son or daughter. This includes details of the Scheme Administrator and the procedure for repaying the deposit. The actual rules are complicated and require detailed legal advice.

The landlord also has to sign a certificate confirming that the information provided is accurate and that the landlord has given the tenant an opportunity to sign any document containing the prescribed information.

If I own a property in the UK but live overseas do I need a TDS?

Yes, if the property is let on an Assured Shorthold Tenancy in the UK.

What if I let the Assured Shorthold Tenancy before 6th April 2007 for six months and intend to let the same tenant stay?

If you create a new tenancy after 6th April 2007 on substantially the same basis as the previous tenancy, then the initial deposit that was paid before 6th April 2007 must be safeguarded through a TDS. If however you let the old tenancy continue on a periodical basis from month to month with no new agreement, then you will not need a TDS.


What if damage has been caused at the property?

A TDS will have a scheme to be used when there is a dispute. It is good practice for a landlord at the start of the tenancy to create an inventory, including a schedule of the condition of fixtures and fittings, in case a dispute arises over the return of the deposit.


What if I don’t use a TDS?

The landlord may be prevented from recovering possession of the property and may have to repay to the tenant or any relevant person, three times the amount of the deposit.


For further information on the approved schemes, please contact:


1. Custodial scheme

The Deposit Protection Service

www.depositprotection.com Tel: 0870-70171707


2. Insurance-based schemes

Tenancy Deposit Solutions Limited

www.mydeposits.co.uk Tel: 0871-7030552

The Tenancy Deposit Scheme

www.tds.gb.com Tel: 0845-2267837