Tenancy deposit protection (TDP) came into effect on 6 April 2007 as part of the Housing Act 2004.

The law requires all deposits taken on assured shorthold tenancies in England and Wales starting after 6 April 2007 to be protected in a government-authorised deposit protection scheme.

Landlords do not have to take a deposit, but if a deposit is taken it must be monetary and it must be protected in a government-authorised scheme. Landlords should not be beguiled into believing that they can circumvent the legislation by taking what amounts to a deposit in a different way.  The courts are finding against landlords who spuriously claim not to have taken a deposit when in fact they have (more below).

The Scottish Government and the Northern Ireland Executive are looking at options for deposit protection.

The NLA View

The government originally intended to introduce a universal, mandatory, custodial tenancy deposit protection scheme. The NLA conceded that there was a problem with a minority of landlords wrongly withholding deposits, but believed the government proposal would be disproportionate and bureaucratic.  Faced with the inevitability of legislation, the NLA argued for the inclusion of an insurance-based option which would enable landlords who regarded the taking and holding of deposits to be an important part of their lettings business to continue to do so.

In response to these representations the government amended their proposals to include provision in the subsequent legislation for insurance-based options to operate alongside a default, custodial scheme.

It is important to understand that the government’s overriding aim is to safeguard the tenant.  It is also hoped that TDP will influence landlord-tenant behavior in a positive fashion, in turn raising standards in the private-rented sector.  This is why the NLA decided that the best way to safeguard landlords’ legitimate interests would be for the NLA itself, in partnership with its insurance advisers, Hamilton Fraser plc, to bid for a contract to run an insurance-based scheme.  In this way the NLA’s experience in landlord-tenant matters could be brought to bear on processes to ensure as far as is practicable that competing interests of landlord and tenant are properly taken into account.

Find out more about my|deposits - NLA's recommended Tenancy Deposit Protection scheme: