Deposits must be protected correctly from day one. This guide covers the rules, the schemes, how to make deductions and how to resolve disputes.
Tenancy deposits are one of the most legally fraught areas of residential lettings in England and Wales. The rules are strict, the penalties for non-compliance are severe, and disputes are common. This comprehensive guide covers everything you need to know.
How much can you charge?
Since the Tenant Fees Act 2019, deposits for tenancies starting after 1 June 2019 are capped at: - 5 weeks' rent where annual rent is below £50,000 - 6 weeks' rent where annual rent is £50,000 or above
Weekly rent is calculated as (monthly rent × 12) / 52. Charging more than the permitted amount is a criminal offence.
The protection requirement
Any tenancy deposit must be protected in a government-approved scheme within 30 days of receipt. The three approved schemes are: - Deposit Protection Service (DPS) - mydeposits - Tenancy Deposit Scheme (TDS)
Custodial schemes (DPS Custodial, TDS Custodial) hold the money themselves and are free to use. Insurance-backed schemes (mydeposits, TDS Insured, DPS Insured) allow you to hold the deposit yourself and charge a fee.
Prescribed Information
Within 30 days of receiving the deposit, you must also provide tenants with "Prescribed Information" — a specific set of information about the deposit and the protection scheme. Failure to provide Prescribed Information on time is treated the same as failure to protect the deposit.
Prescribed Information must include: the amount of the deposit, the address of the property, the name and contact details of the deposit protection scheme, the scheme's terms and conditions, information about the dispute resolution service, and landlord and tenant contact details.
At the end of the tenancy
Within 10 days of agreeing on the amount to be returned, you must return the deposit (minus any agreed deductions). If you and the tenant cannot agree on deductions, the dispute can be referred to the deposit scheme's free adjudication service.
Only deductions for actual loss can be made: unpaid rent, damage beyond fair wear and tear, cleaning to restore the property to its original standard, and replacement of missing items from the inventory.
Fair wear and tear is perhaps the most contested concept in deposit disputes. It means the natural deterioration of a property through normal use over time. You cannot charge tenants for repainting walls that were already aging when they moved in, or for replacing carpets that were old and near the end of their useful life.
The importance of a good inventory
The quality of your inventory determines whether you can successfully claim deductions from a deposit. A vague inventory (e.g., "walls in good condition") provides no basis for a deduction claim. A detailed inventory with room-by-room descriptions and dated photographs can support claims for specific damage.
Our management service includes professional inventory preparation and deposit protection administration as standard.