Security deposits and the law


What are security deposits?

Security deposits – or tenancy deposits – are required by law to be paid by tenants to their landlord as security against damage or rent arrears whilst in tenancy.

Security deposit law – prior to the changes

The law regarding security deposits changed in 2007 in an attempt to put tenants and landlords on a more level playing field in the event of a dispute. Before the change in security deposit law, landlords held the deposit and if a dispute arose then the tenant would have had to sue the landlord in an attempt to retrieve some or all of the deposit.

Security deposit law – now

The change in security deposit law has made it compulsory for a landlord to use the tenancy deposit scheme.

What is the tenancy deposit scheme?

There are two main types of scheme available to landlords:

  • The custodial scheme
  • The insurance scheme

What is the custodial scheme?

In the custodial scheme the tenant pays the deposit to the landlord, who must then pay the deposit into the chosen custodial scheme within fourteen days of receiving the money. The landlord must also give the tenant details of the scheme that has been selected, the landlord or agent’s contact details, how to apply for release of the deposit, information explaining the purpose of the deposit and what to do if there is a dispute about the deposit.

At the end of the tenancy, if the parties agree how the deposit should be divided, the scheme will return the deposit as agreed. If there is a dispute, the scheme will hold the deposit until the dispute resolution services or the courts decide what is fair.

What is the insurance scheme?

The insurance-based scheme differs from the custodial scheme in that the landlord continues to hold the deposit, but pays a premium to the insurer. If there is agreement at the end of the tenancy as to how the deposit should be distributed, then the landlord should return the agreed amount to the tenant. If there is a disagreement, then the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved.

What if you have a dispute?

If you have a dispute over your tenancy deposit, you should contact a landlord and tenancy solicitor. They may be able to get your whole deposit back.

If your landlord or agent has not protected your deposit, they can be ordered to repay three times the amount of the deposit back to you.

If you would like to obtain legal advice on security deposit law, Contact Law can put you in touch with a local specialist landlord and tenancy solicitor free of charge. Please call us on 0800 1777 162 or complete the web-form above.

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