Tenancy Deposit Schemes
Updated July 2012
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.