Briefing Note

Tenancy Deposit Schemes

Updated July 2012

Introduction

This Briefing Note explains what a tenancy deposit scheme (TDS) is and what a landlord’s obligations are under a TDS.

This Briefing Note should not be relied upon as legal advice and you should contact us for advice on your specific circumstances.

What is a TDS?

A landlord under an assured shorthold tenancy (AST) must protect a tenant’s deposit by using an authorised tenancy deposit scheme (TDS) operated by an approved scheme administrator. A TDS has two main objectives:

  • To ensure that, when a tenant pays a deposit, it will be protected and returned to the tenant at the end of the AST, except when the landlord has a legitimate claim on it.
  • To resolve disputes between landlords and tenants using dispute resolution rather than via the courts.

There are two types of TDS:

  • A custodial TDS requires a landlord to pay their tenant’s deposit to a scheme administrator, who holds the deposit until the tenancy ends.
  • An insurance TDS is where the landlord retains possession of the deposit but secures it by paying a fee and insurance premiums to the scheme administrator.

What are a landlord’s obligations under a TDS?

Within 30 days of receipt of the deposit a landlord must:

  • Comply with the “initial requirements” of the TDS.
  • Give the tenant certain prescribed information.

What sanctions are available if a landlord fails to fulfil their obligations under a TDS?

  • If a landlord fails to comply with the TDS, a tenant can apply to court even if the tenancy has ended.
  • The penalty for failing to comply with the TDS will be between one and three times the deposit.

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