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Guarantied Deposit Scheme Explained


The Tenancy Deposit Scheme came into force on the 6th April 2007. If you are not protecting a tenant’s deposit you will be ordered to repay three times the amount to the tenant so find out how you can protect deposits and resolve disputes.

Why protect deposits?

Deposits are protected to ensure:

  • tenants get all or part of their deposit back, when they are entitled to it
  • any disputes between tenants and landlords or agents will be easier to resolve
  • tenants are encouraged to look after the property they are renting

Letting a property

When a landlord or letting agent takes a deposit from a tenant, the deposit must be protected in a government-authorised tenancy deposit scheme.

This new rule applies if the tenancy is an assured shorthold tenancy.

Moving in

At the beginning of a new tenancy agreement, the tenant pays their deposit to their landlord or agent as usual. The landlord or agent must then ensure it is protected.

Landlords and agents have a choice of three schemes providers, offering two types of scheme to protect the deposit.

Custodial schemes
Money is held by the scheme until it is time for it to be repaid at the end of the tenancy. The custodial scheme is free to use. The landlord simply puts the deposit into the scheme at the beginning of the tenancy. There is one custodial scheme provider.

Insurance-based schemes
Under the insurance schemes the landlord keeps the deposit, and pays the insurance scheme to insure against the landlord failing to repay the tenant any money due to him. There is a choice of two insurance-based schemes.

Protecting the deposit

Within 14 days of taking the deposit, you must provide your tenant with details of how the deposit is being protected including:

  • the contact details of tenancy deposit scheme
  • the contact details of the landlord
  • how to apply for the release of the deposit
  • information explaining the purpose of the deposit
  • what to do if there is a dispute about the deposit

Tenants have a responsibility to return the property in the same condition they took it on.

Moving out

At the end of tenancy the condition and contents of the property should be checked against the agreement made at the start of the tenancy. The landlord or agent then agrees with the tenant how much of the deposit will be returned to them.

Within 10 days the agreed amount of the deposit will be returned to the tenant.

Resolving disputes

If no agreement can be reached about how much of the deposit should be returned, there will be a free service to help resolve disputes offered by the scheme which is protecting the deposit.


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