Taking a deposit is simple. Protecting it correctly is where landlords come unstuck, and the cost of getting it wrong is out of proportion to how small the mistake usually is. A deposit that is not protected properly can cost you up to three times its value in compensation and can block your route to possession. This is one worth doing carefully.
Protect it, and protect it on time
If you take a deposit for an assured tenancy in England, you must protect it in one of the three government-approved schemes: the Deposit Protection Service, MyDeposits, or the Tenancy Deposit Scheme. You have 30 days from receiving the deposit to protect it and to give the tenant the prescribed information. The 30-day clock is strict, and missing it is the single most common deposit mistake.
The schemes come in two types. In a custodial scheme, you hand the deposit to the scheme and it holds the money for free. In an insured scheme, you keep the money and pay the scheme a fee to insure it. Either is fine. What matters is that the deposit is protected within the deadline.
The prescribed information
Protecting the money is only half the duty. Within the same 30 days you must give the tenant the prescribed information. This is a specific set of details: which scheme holds the deposit, how much it is, the address of the property, your contact details and the tenant's, the details of anyone else who contributed to the deposit, how the deposit will be returned, what deductions can be made, and what to do if there is a dispute.
Most landlords who lose deposit cases did protect the money but failed to serve the prescribed information, or served an incomplete version. The scheme usually provides a template. Use it, serve it in full, and keep proof that you did.
The deposit cap
Since the Tenant Fees Act 2019, the deposit you can take is capped. Where the annual rent is under £50,000, the cap is five weeks' rent. Where it is £50,000 or more, the cap is six weeks' rent. Take more than the cap and the excess is treated as a prohibited payment, which you have to repay and which can bring its own penalty. Work the cap out as weekly rent multiplied by five, not monthly rent multiplied by a rough figure, because the monthly shortcut often tips you over.
Why it blocks possession
Here is the part that catches landlords out. If you have not protected the deposit or served the prescribed information, your ability to rely on certain possession grounds is affected. Under the old regime this made a Section 21 notice invalid. Under the Renters' Rights Act, with Section 21 gone, deposit compliance still matters for possession and for any tenant claim, and an unprotected deposit remains a live liability. The short version is that a deposit failure does not just risk a penalty, it can leave you unable to get your property back when you need to.
At the end of the tenancy
When the tenancy ends, agree any deductions with the tenant. You can deduct for unpaid rent and for damage beyond fair wear and tear, but not for normal ageing of carpets, paint and fittings. A good inventory taken at the start, with photographs and the tenant's signature, is what makes a deduction stick. If you and the tenant cannot agree, each scheme runs a free dispute resolution service, and the adjudicator decides based on the evidence. Return the undisputed part promptly.
If an agent holds the deposit
If your agent takes and holds the deposit, confirm in writing which scheme it goes into, who serves the prescribed information, and that it is done within the 30 days. Ask for the protection certificate and a copy of the prescribed information for your own file. This is also a good moment to check the agent belongs to a client money protection scheme, because that protects your money if the agent's business fails. Protect the money, serve the full prescribed information, stay under the cap, and keep the paperwork. Four steps, a strict deadline, and a penalty large enough to make all four worth doing right the first time.
This article is general information, not legal advice. Rules differ across England, Wales, Scotland and Northern Ireland, and they change. Check the current position or take professional advice before acting.
