Deposit Protection Schemes – What Landlords and Tenants Shou

Deposit Protection Schemes – What Landlords and Tenants Should Know About

You can find all the information you need regarding tenancy deposits and deposit protection plans in this article. So keep reading!


The laws of tenancy deposits have generated controversy since the Tenant Fee Ban. 60% of landlords reported that they struggle with deposit issues. Understanding the “ins and outs” of deposit protection systems is important for landlords, renters, and renting agents. 

A legal requirement for guaranteed shorthold tenancies since April 2007 is deposit protection. These programmes, which are required by law, make sure that both you and the renter are equally covered when a deposit is agreed upon.

You can find all the information you need regarding tenancy deposits and deposit protection plans in this article. So keep reading!

What is a Deposit Protection Scheme?

A security deposit, also known as a tenancy deposit, is a sum of money that’s paid by a tenant before moving into a rental property. The amount should not be more than five weeks of the rent you’re supposed to pay to your landowner. The cash is paid with your first month’s rent once the tenancy agreement is signed and sealed from both sides.

Also, it must be offered before the tenant has moved into the house. The landlord can’t ask for the same after they have already rented the house. It would defunct the policy.

If you are living somewhere in England, the deposit must be signed and registered with some sort of deposit protection scheme. The funds will be protected by the same through the entire tenancy period and returned when the inhabitant leaves the house.

If the tenant has done anything to the property, such as damaging or renting it, the landlord is legally bound to use the deposit. But, it cannot be used for anything but covering the cost.

What Should the Deposit Amount be?

The amount of tenancy deposit in England should not be more than the money you must pay to stay there for five weeks. But, it’s applicable for properties with an annual rent of around 50,000 Euros or less. If the rent amount is higher, the deposit will be capped at six weeks.

This limit or restriction regarding the same was introduced in the Tenant Fee Ban in 2019. It was done to protect people from paying unnecessary rental expenses. But, if you are living in Scotland, your overall deposit will be limited to only two months of rent.

How to Calculate Your Deposit Amount?

Calculating the landlord deposit protection compensation is, in essence, pretty simple. All you need to do is to figure out your one week’s rent and then multiply it by five. Sometimes, while calculating the money they owe, people tend to divide their rent by four. But, that’s not right.

Many months do have five weeks as well. Thus, if you want to calculate it properly, you must divide your one year’s rent by 52. Here’s what the equation should look like.

Let’s say you have to pay around 26,000 in a year. Hence, at first, you will need to divide the total by 52. It should be something like this –

26,000 ÷ 52 = 500.

500 x 5 = 2,500.

So, you must pay 2,500 Euro at the beginning of your home-entering month to your landlord. If your deposit amount has a long decimal number, it’d be best to round the number down. It, in turn, will ensure that you are not exceeding your legal cap.

Should a Landlord Take the Deposit?

Legally speaking, no. The landlord isn’t obligated to ask or request a deposit from their client or tenant. However, it’s certainly recommended for them to do so. After all, if something goes wrong, the deposit will be able to cover the expense that the occupant has caused.

However, if you are working with a property company or an agent, then they will ask for the fee to be reimbursed before moving in. You’ll get documentation for that as well.

What Should be the Tenancy Deposit Paid?

The deposit should technically be paid once the landlord and the tenant have signed off on their tenancy agreement. However, the payment should be completed before you move in. Once the landlord or their letting agent has received the money, they have a duration of thirty days to register with a deposit scheme. They’ll get a letting plan after the procedure is completed.

Is Paying Tenancy Deposit Legal?

Since the introduction of the Tenant Fee Ban, a lot of things that tenants had to do before have been stopped or banned. However, the deposit is something the tenant can and should pay.

The Ban program has reduced tenant expenses to some extent and capped the entire deposit amount by a mile. And it has also banned the –

● Renewal fee. 

● Reference check, and 

● Administration costs.

Depositing the amount early is entirely legal as long as you are staying within the specified restriction. As the landowner, you can change your tenant for late payment as well. It can also end the tenancy at the earliest. But you won’t be considered liable for that.

Where Can You Register a Deposit?

If you are a landlord living in England, you must register your tenancy deposit with a proper government-approved deposit protection scheme. It may include the following –

● Deposit protection scheme.

● Tenancy deposit service, and

● MyDeposits,

The tenancy deposit, which you have received from your tenant, must be registered within 30 days. And you have to tell the tenant about where you are stashing their deposit at the earliest.

The Bottom Line

When it comes to registering a tenancy deposit amount, you must complete the paperwork at the beginning of the stage. Here’s what you need to jot down there –

● The amount of the deposit.

● The address where the house is located.

● The address, name, and contact of the tenancy deposit scheme.

Apart from that, you must provide your name, contact details, and address as well. If there is a third party who has contributed to the deposit, their name should be there too.

Also, don’t forget to check out the terms and conditions of the scheme. If you don’t maintain them properly, the deposited money might get taken by the government.

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