This week’s #DepositDoctor blog, written by RLA partners the Tenancy Deposit Scheme answers a popular question from landlords, “Can I hold my tenant’s deposit?”
Types of deposit protection
With the protection of deposits being a legal requirement since 2007, it’s worth remembering the obligations placed on a landlord to protect a tenancy deposit and of the various options available; this is particularly relevant if you are renting out a property for the first time. If you take a tenancy deposit from your tenant, there are two different methods of tenancy deposit protection available to you through TDS; Insured or Custodial.
Custodial deposit protection is offered by TDS as a completely free service, and as a landlord your will need to pass over the full tenancy deposit to TDS for safe keeping. In TDS Custodial we hold onto the deposit on your behalf, and then, with the parties agreement, release it at the end of the tenancy in accordance with the tenant and landlord’s instructions. If the tenant does not agree with the landlord’s claim, they can use the online service to manage some of the negotiations about the any deposit deductions before referring the matter to be resolved by the TDS adjudication service if there are some items unresolved. TDS will release any undisputed amounts as agreed and retain only the amount in dispute.
The other method of protecting a tenancy deposit, TDS Insured, means that the landlord can hold the tenant’s deposit throughout the term of the tenancy. The landlord pays a protection fee per tenancy deposit registration. The landlord is responsible for returning the deposit to the tenant at the end of the tenancy, less any agreed deductions. In cases where the tenant disputes one or all the deductions, a tenancy deposit dispute may be referred to TDS and, in that situation, the landlord must pass the disputed amount to TDS to hold during the adjudication process.
This means if the full deposit is £1000, and the tenant agrees to the landlord’s claim of £300 for redecoration, but not their claim of £200 for cleaning, the landlord would keep £300, repay £500 to the tenant and pay £200 to TDS, but only if and when requested. TDS would hold the disputed sum while either awaiting an agreement, a Court decision or a published report of adjudication by TDS. After gathering evidence from both parties, the adjudicator may either make an award to the landlord and/or return any balance held to the tenants.
Can a landlord hold on to the tenant’s deposit?
In conclusion, a landlord may hold their tenant’s deposit, but it must be registered for protection in one of the TDS schemes.
TDS recommends that in order to avoid disputes, landlords should communicate clearly and often with their tenants. For more advice on disputes and how to avoid them, visit our deposit disputes page.
For more landlord tips please view our landlord FAQ page.