The Types Of Tenancy Deposit Schemes

Moving to a rented space requires a tenant to pay a security deposit to the landlord. These deposits usually safeguard the landlord from certain property damages.

Recently, there has been a staggering rise in tenancy deposit values. Numbers suggest tenancy deposits increased to over £4 billion in recent times.

With a rise in private rented homes, in-depth knowledge of tenancy deposit protection is beneficial for landlords. On the other hand, tenants can plan their deposits in advance with thorough information.

This blog aims at educating landlords and tenants about tenancy deposit schemes.

Let’s understand the UK protection schemes that aim at maintaining a healthy landlord and tenant relationship. If your landlord didn’t protect your deposit, you can make a tenancy deposit compensation claim.


What is a Tenancy Deposit Scheme?

A tenancy deposit scheme (TDS) protects a tenant’s deposit from the landlord. In simple words, TDS aims to safeguard deposits paid by the tenants.

  • Tenants deposit a certain security amount to a property owner
  • The property owner needs to put this deposit amount in a relevant scheme

Starting April 2013, landlords must protect tenants’ deposits in a certified TDS. This is a mandatory process that ensures that tenants get their deposit back after the end of the tenancy.

Why Choose TDS?

Tenancy DepositDeposit protection schemes are helpful for dispute resolution. After the end of a tenancy, a third-party agent can intervene in a landlord and tenant dispute.

In a nutshell, a tenancy deposit scheme proves beneficial for two purposes.

  • Alternative dispute resolution
  • Safeguarding tenant deposit

Also, these approved schemes can help tenants get back holding deposits in case the landlord pulls out.

Overall, TDS is now a vital extension of the tenancy agreement. Every tenant should make use of this deposit protection scheme to secure the deposit.

Tenancy Deposit Scheme Information

Most landlords expect deposits from tenants for the following financial security reasons.

  • In the event of property damage
  • In case the tenant skips a month’s rent

However, the landlord should provide written information on deposit protection under government-approved schemes. As a tenant, you can expect details of the prescribed information as below.

  • Tenancy address
  • Details of holding deposit or amount in a TDS insured scheme
  • Contact details of landlord or letting agent
  • In-depth information on the tenancy deposit protection scheme
  • Rules in case you lose contact after the tenancy ends

Importantly, this law also applies to landlords who own a property in Northern Ireland. Even if they reside in another location, they need to adhere to the deposit protection scheme.

Overall, landlords need to protect the deposit within a prescribed limit of 30 days or less.

What Happens at the End of Tenancy Agreement?

A landlord returns the tenant’s deposit as per the rules of the insured scheme. However, the deposit protection service holds the amount in case of a dispute.

After dispute resolution, the tenant receives the promised deposit amount. Moreover, landlords should return the protected deposit within a period of 10 days.

Of course, mutual agreement simplifies the overall process in most cases.

Types of Tenancy Deposit Protection Schemes

TDS insured schemes in England and Wales are registered in any of the three well-known administrators.

  • MyDeposits
  • Tenancy Deposit Scheme
  • Deposit Protection Service

These operators are government-approved and have a well-defined structure for deposit protection. At this time, landlords use these schemes to protect the original deposit of a tenant.

Custodial Deposit Scheme

Rent DepositThis is a well-known scheme to protect tenancy deposit amounts as it is straightforward to understand.

Let’s consider you are the tenant. You find a suitable property in England and Wales with reasonable tenant fees.

Now, let’s assume you rent the property on an assured shorthold tenancy (AST). Here’s the step-by-step process:

  • You pay the deposit amount to the landlord
  • The landlord receives and contacts a preferred custodial scheme operator
  • The registration process takes place
  • A third-party operator holds this TDS custodial amount
  • You get a copy of all the scheme details
  • The tenant at the end of tenancy receives the amount.

The custodial tenancy deposit scheme is straightforward for the landlord. Importantly, custodial schemes are usually free to use.

As a landlord, you need to follow these steps.

  • Create an account and add the tenancy details
  • Add property to the account
  • Enter legally required information about the tenants
  • After receiving the tenant’s deposit, transfer the money from your bank account

Note: The Deposit Protection Service (DPS) or relevant operator holds the amount. Landlords should transfer the deposit to a DPS account to complete the custodial scheme formalities.

Finally, at the end of the tenancy, the operator pays the amount to the tenant.

Insured Deposit Scheme

In the case of custodial schemes, landlords take the amount from tenants and deposit it to the scheme operator.

However, in an Insured Deposit Scheme, landlords can retain the deposit amount until the end of the tenancy.

If you are a landlord, you have more control over the money. Still, you need to pay a small fee for this benefit. Tenants need to follow a similar process as mentioned in Custodial Deposit Scheme.

For landlords, the steps are as follows.

  • Instead of custodial, create an insured account
  • You receive a direct debit mandate from DPS
  • Fill in the details
  • Make sure to possess Client Money Protection

This tenancy deposit protection scheme is helpful for corporate property owners and letting agents.

Note: You don’t face third-party interference in the TDS custodial scheme as a tenant. The parties can mutually agree to the distribution and return of the deposits.

Moreover, this deposit protection scheme is quicker than other TDP schemes. However, if the landlord and tenant disagree on a particular point, the final decision will take place via a third-party intervention.

Deposit Protection Service

Tenancy AgreementThe Housing Act 2004 in England and Wales was crucial for the tenancy deposit protection legislation. As a result, tenancy deposit schemes became prominent in the UK.

As a landlord, you need to create a Deposit Protection Service (DPS) account to safeguard a tenant’s deposit in various schemes.

The procedure for creating this account is fairly straightforward. Here’s what you need to provide as a landlord.

  • Email address
  • Password
  • Answers to security questions

Note: You can create a Deposit Protection Service (DPS) account without active tenants. This process is essential for the social and private rented sectors alike.


This scheme provider offers a swift deposit and dispute resolution service since 2007. Interestingly, MyDeposits offers landlords and tenants three deposit protection schemes.

  • Custodial
  • Insured
  • Replacement

This operator is run by the renowned Hamilton Fraser family, which are well-known for tenancy deposit protection in the private rented sector.

With a registered office in Borehamwood, MyDeposits provide guidance on assured shorthold tenancies and professional advice on various deposit protection schemes.

Note: The process of deposit protection schemes under MyDeposits is similar to TDS schemes. However, landlords can notice variable processing fees compared to other operators.

Free Dispute Resolution Service

Landlords and tenants can use the dispute resolution service by submitting a claim to MyDeposits. You need to follow a well-defined process.

  • Create account
  • Submit claim
  • Upload evidence

Thus, tenants can follow a simple three-step process to avail benefits of MyDeposits dispute resolution service.

For submitting the evidence, you need the following details.

  • Dispute notification claim form
  • DDF
  • Tenancy agreement
  • Rent arrears
  • Annual rent details
  • Insured scheme details

Thus, you can resolve a dispute after the end of the tenancy at MyDeposits without much hassle.

Which is the Best Tenancy Deposit Scheme in the UK?

Deposit safeguarding schemes often come to the forefront after the end of a tenancy.

Property owners need to follow the basic procedure of applying to a suitable insurance scheme. However, a rent payer and owner might need legal action in case of disputes.

Thus, an ideal protection scheme should have the following features.

  • Ease of application process
  • Quick access to prescribed information
  • A small fee for deposits
  • Clear instructions on an assured shorthold tenancy

Tenant Getting KeysNotably, the scheme providers should have a registered office in the UK. At this time, all these points are applicable to three prominent UK tenancy administrators.

The question is – Custodial or Insured?

  • Custodial schemes are free for landlords
  • Insured schemes have a certain processing fee

On the other hand, here’s why homeowners prefer insured schemes

  • Custodial schemes have a third-party influence
  • Insured tenancy schemes provide more flexibility

The bottom line – Both schemes have certain pros and cons. A landlord can decide the type of tenancy protection scheme based on certain factors.

  • Type and scale of properties
  • Number of tenants
  • Need of control over tenant’s deposit money
  • Mutual discussions

Overall, if you are a landlord and have tenants that pay the rent without fail, a custodial scheme will work fine.

Summing Up

If the tenant fails to pay rent or damages the residential property during the period of tenancy, the landlord can file a complaint to hold the deposit.

On the other hand, if the tenant abides by all the terms and conditions, these schemes can help them get the rightful amount.

Thus, tenancy deposit schemes are beneficial for both tenants and landlords. If you want to rent a property in the UK, it is mandatory to opt for custodial or insured schemes.

Frequently Asked Questions

Homeowners in the UK have common FAQs that need a straightforward addressal. This section covers all such queries.

How many tenancy deposit schemes are there?

On the whole, there are two main types of TDS – custodial and insured. The former holds the deposited amount for free. However, it needs the intervention of the holding party.

The latter, i.e., insured schemes, allows letting agents or landlords hold the deposited amount in their bank accounts. This scheme charges fees for offering more control over the amount.

MyDeposits, Deposit Protection Service, and Dispute Service Limited offer tenancy insurance schemes to UK residents.

Does the local council help with deposits?

You can get housing benefits if you meet the following criteria.

  • Low income (Savings below £ 16,000)
  • UK resident
  • Rent requirement

Soon, Universal Credit (UC) will replace the housing benefit. Your local council can provide detailed information about landlords who accept tenants with such government benefits.

Also, rent guarantee schemes can prove helpful in such cases. The local council can help with deposits by offering invaluable insights on the same.

Can a landlord rent a flat on Universal Credit?

Universal Credit can help you get the required amount for renting a flat. In addition, UC helps cover service charges to eligible citizens.

Further, you can even apply for Council Tax Reduction (CTS) through Universal Credit. In such cases, it is crucial to note down eligibility requirements.

What is the Reposit Scheme?

In Reposit, you pay a small fee to the landlord instead of a hefty deposit. You can end up saving money with this scheme.

However, the property owner should be a Reposit partner. Also, the fees are refundable before the start of a tenancy period.