What Is a Tenancy Deposit?

A tenancy deposit is money paid by a tenant as security against certain financial losses that may arise during or at the end of the tenancy.

Depending on the tenancy agreement and available evidence, it may potentially be used towards:

• Unpaid rent
• Damage beyond fair wear and tear
• Missing items
• Cleaning required to restore the property to its original documented standard
• Unpaid bills for which the tenant is responsible
• Replacement keys or security devices
• Other breaches resulting in a demonstrable financial loss

The deposit should not be treated as the landlord’s income or used during the tenancy without proper authority.

The landlord must be able to justify any proposed deduction using evidence such as the tenancy agreement, inventory, check-in report, photographs, invoices, rent statements and communications with the tenant.

Is a Landlord Required to Take a Deposit?

A landlord is not legally required to take a tenancy deposit.

However, where a landlord chooses to accept one, the deposit must normally be protected in a government-approved tenancy deposit protection scheme.

A properly documented deposit can provide useful protection, but only where:

• The amount taken is lawful
• It is protected on time
• The prescribed information is correctly served
• The deposit remains protected throughout the tenancy
• Any deductions are reasonable and supported by evidence

Government guidance confirms that a landlord or agent taking a deposit must use a government-approved protection scheme.

Which Tenancies Require Deposit Protection?

Deposit protection generally applies when a monetary tenancy deposit is taken in connection with a qualifying private residential tenancy in England.

Following the tenancy reforms introduced from 1 May 2026, most private rented tenancies in England operate as assured periodic tenancies. Government and approved-scheme guidance continues to require relevant deposits to be protected within 30 days.

Different rules may apply to arrangements such as:

• Genuine lodger arrangements where the landlord shares the home
• Company lets
• Holiday accommodation
• Certain licences to occupy
• Non-housing arrangements
• Tenancies outside England
• Deposits that do not consist of money

The name given to an agreement does not necessarily decide its legal status. Where the tenancy type is uncertain, landlords should obtain legal advice before assuming that deposit protection is unnecessary.

How Much Deposit Can a Landlord Take?

For most private tenancies in England, the maximum refundable tenancy deposit is:

Government guidance states that properties with annual rent above £100,000 are not covered by the Tenant Fees Act deposit cap, although other contractual and legal considerations may still apply.

Example: Five-Week Deposit

For monthly rent of £1,800:

£1,800 × 12 = £21,600 annual rent
£21,600 ÷ 52 = £415.38 weekly rent
£415.38 × 5 = £2,076.92 maximum deposit

Landlords should calculate the deposit accurately rather than simply taking an amount equal to six weeks or one-and-a-half months’ rent.

Tenancy Deposits and Holding Deposits Are Different

A tenancy deposit is security held during the tenancy.

A holding deposit is paid before the tenancy begins to reserve the property while referencing and tenancy arrangements are completed.

A holding deposit is generally capped at one week’s rent. Where it is later applied towards the tenancy deposit, the resulting tenancy deposit must be protected within the applicable legal deadline.

Landlords should keep clear records showing:

• When the holding deposit was received
• What it was intended for
• Whether it was refunded
• Whether it was applied to rent
• Whether it became part of the tenancy deposit
• The date the tenancy deposit was treated as received

The 30-Day Deposit Protection Deadline

The landlord or letting agent must protect the deposit in a government-approved scheme within 30 days of receiving it.

Within the same period, the tenant and any relevant person who paid the deposit must also receive the required information explaining how the deposit has been protected.

The safest approach is not to wait until day 30.

At Yes Properties, we aim to complete deposit registration and provide the relevant documents as part of the tenancy setup process, subject to receiving the cleared funds and all necessary information.

Government-Approved Deposit Schemes

The three authorised tenancy deposit protection providers operating in England are:

• Deposit Protection Service — DPS
• MyDeposits
• Tenancy Deposit Scheme — TDS

Using an ordinary client account, savings account or insurance policy is not enough. The deposit must be protected through an authorised scheme.

The Two Main Deposit Protection Options

Landlords generally have a choice between:

Custodial Protection

Under a custodial scheme:

• The deposit is transferred to the protection scheme
• The scheme holds the money during the tenancy
• Protection is generally free
• Neither the landlord nor agent retains the deposit
• The scheme releases the funds after the parties agree
• Disputed money remains protected until the dispute is resolved

The DPS and MyDeposits describe their custodial options as free services where the scheme holds the deposit for the tenancy.

Custodial protection may suit landlords who:

• Want a straightforward free option
• Prefer not to hold tenant money
• Do not need access to the deposit during the tenancy
• Want the scheme to manage the release process
• Manage only one or a small number of properties

Insured Protection

Under an insured scheme:

• The landlord or agent retains the deposit
• A fee is paid to the scheme
• The deposit must be held in accordance with scheme rules
• The money remains protected by the scheme
• Any disputed amount must normally be transferred to the scheme when required
• The scheme can provide dispute resolution

Approved-scheme guidance explains that under insured protection the landlord or agent holds the deposit and pays a protection fee.

Insured protection may suit landlords or agents who:

• Have suitable client-money procedures
• Want to retain control of the funds
• Manage multiple tenancies
• Understand the scheme’s payment and renewal requirements
• Can keep the deposit properly ring-fenced
• Can transfer disputed funds promptly when requested

An insured scheme is not permission to spend the deposit. It remains the tenant’s money and must be kept available for repayment.

Custodial or Insured: Which Should You Choose?

Neither option removes the need to:

• Register the deposit within 30 days
• Give the required prescribed information
• Follow the scheme rules
• Keep accurate records
• Maintain adequate evidence
• Deal with repayment promptly at the end

Option 1: Protect the Deposit Yourself

Landlords may register and administer the deposit directly with one of the authorised schemes.

This can be suitable where the landlord is confident managing compliance personally.

The landlord will be responsible for:

1. Calculating the lawful deposit amount
2. Recording the date and payer of the deposit
3. Choosing an authorised scheme
4. Registering the deposit within 30 days
5. Paying any insured-scheme fee
6. Completing the prescribed information accurately
7. Giving the information to the tenant and relevant person
8. Obtaining evidence that the documents were served
9. Updating the registration when required
10. Managing any change of tenant, landlord or agent
11. Keeping the deposit protected for the tenancy
12. Handling repayment and proposed deductions
13. Preparing evidence for any dispute

Landlords should not assume that merely transferring the money to a scheme completes every legal requirement. The protection and prescribed-information duties are separate compliance steps.

Option 2: Ask Yes Properties to Protect the Deposit

Yes Properties can administer deposit protection where this is included within our agreed service or purchased as an additional service.

We are registered with the Deposit Protection Service, membership reference 4025820.

Depending on the service selected, we can:

• Calculate the appropriate deposit
• Receive the tenancy deposit
• Register it with the authorised scheme
• Arrange custodial protection
• Provide the deposit certificate
• Prepare the prescribed information
• Arrange signature or acknowledgement where appropriate
• Supply documents to the tenant
• Maintain the registration records
• Record deposit information within the tenancy file
• Coordinate repayment at the end of the tenancy
• Propose deductions on the landlord’s behalf
• Submit evidence in the event of a dispute

Important

Where Yes Properties is instructed only to arrange initial protection and the landlord later manages the tenancy, the landlord must understand who is responsible for:

• Updating the scheme
• Dealing with tenancy changes
• Renewing insured protection where applicable
• Returning the deposit
• Responding to repayment requests
• Handling disputes

These responsibilities should be clearly recorded in the agency agreement.

Why Use Yes Properties?

Reduced Risk of Missed Deadlines

Deposit deadlines can be overlooked where landlords are also managing referencing, safety documents, repairs and move-in arrangements.

Our tenancy process helps bring the documentation together in a structured way.

Correct Deposit Calculation

We calculate the permitted deposit using the rent and applicable statutory cap.

Prescribed Information Preparation

We prepare the relevant scheme documentation using the landlord, tenant, property and deposit details held on file.

Evidence of Service

We retain records demonstrating when and how the deposit documentation was provided.

Tenancy File Management

The deposit certificate, prescribed information, inventory and tenancy documents can be kept together as part of the compliance file.

End-of-Tenancy Support

Where included within our management service, we can coordinate:

• Check-out
• Rent-balance review
• Proposed deductions
• Contractor evidence
• Tenant negotiations
• Deposit-release instructions
• Dispute submissions

Propertymark and Client Money Protection

Yes Properties operates within recognised professional standards for lettings and property management and maintains Client Money Protection where applicable.

What Is Prescribed Information?

Protecting the money is only part of the landlord’s duty.

The landlord or agent must also give the tenant and any relevant person who paid the deposit specific information about the protection arrangements.

This is commonly referred to as the prescribed information.

Government guidance states that the information must include matters such as:

• The address of the rented property
• The deposit amount
• How the deposit is protected
• The scheme’s name and contact details
• Information about its dispute-resolution service
• The landlord’s or agent’s contact details
• Details of any third party who paid the deposit
• Circumstances in which deductions may be proposed
• How the tenant can apply for repayment
• What happens if the parties cannot agree
• What happens if the landlord or tenant cannot be contacted

This information must be provided within 30 days of the deposit being received.

A landlord should keep proof of service, such as:

• Signed acknowledgement
• Electronic-signature record
• Email delivery record
• Recorded delivery evidence
• Document portal audit trail

Who Is a Relevant Person?

A relevant person is someone other than the tenant who paid some or all of the deposit on the tenant’s behalf.

This could include:

• A parent
• A relative
• A guarantor
• An employer
• A charity
• A local authority
• Another third party

The required deposit information should also be provided to the relevant person where applicable.

Landlords should record the actual source of the payment rather than assuming that every payment came directly from the tenant.

Why a Professional Inventory Is Essential

Deposit protection does not automatically prove that a landlord is entitled to deductions.

If a tenant disputes a proposed deduction, the landlord usually bears the burden of showing:

• The property’s condition at the beginning
• The property’s condition at the end
• The tenant’s contractual responsibility
• The actual financial loss
• That the proposed amount is reasonable
• That fair wear and tear has been considered

A strong evidence file may contain:

• Detailed inventory
• Check-in report
• Date-stamped photographs
• Tenant’s signed comments
• Mid-tenancy inspection reports
• Maintenance correspondence
• Check-out report
• Rent statement
• Contractor invoices
• Repair quotations
• Replacement receipts
• Cleaning invoices

Without suitable evidence, a deposit adjudicator may reject a deduction even where the landlord genuinely believes damage occurred.

What Is Fair Wear and Tear?

A landlord cannot normally charge the tenant for ordinary deterioration caused by reasonable use over time.

Fair wear and tear may depend on:

• Length of tenancy
• Number and age of occupiers
• Age of the item
• Original condition
• Quality and expected lifespan
• Nature of the room
• Extent and cause of deterioration

For example, a landlord should not usually claim the full cost of a brand-new carpet where an older carpet was damaged near the end of its expected useful life.

A proposed deduction should reflect the landlord’s actual loss and should not result in betterment.

Common Reasons for Deposit Deductions

Potential deductions may include:

Unpaid Rent

Supported by:

• Tenancy agreement
• Rent schedule
• Bank records
• Rent statement
• Arrears correspondence

Damage

Supported by:

• Check-in inventory
• Check-out report
• Photographs
• Repair invoice or quotation
• Evidence distinguishing damage from fair wear and tear

Cleaning

The tenant can be required to return the property to the same standard of cleanliness recorded at check-in, allowing for fair wear and tear.

A landlord cannot automatically require the tenant to pay for a particular professional cleaning company.

Missing Items

Supported by:

• Signed inventory
• Check-out report
• Purchase evidence
• Assessment of age and remaining value

Garden Neglect

This may be considered where the tenancy placed a clear responsibility on the tenant and the difference is supported by check-in and check-out evidence.

Lost Keys

A reasonable deduction may be proposed for replacement keys or security devices where supported by evidence of actual cost.

What Cannot Normally Be Deducted?

A deposit should not be used for:

• Fair wear and tear
• Pre-existing damage
• Routine improvement
• Full replacement of an item with little remaining value
• Costs unsupported by evidence
• General refurbishment between tenancies
• Problems caused by the landlord’s failure to repair
• Arbitrary administration charges
• Prohibited tenant fees
• Losses unrelated to the tenant’s obligations

The purpose of a deduction is to compensate for an evidenced loss, not to penalise the tenant.

Returning the Deposit

At the end of the tenancy, the landlord and tenant should consider:

• The check-out report
• Rent account
• Property condition
• Missing items
• Cleaning
• Keys
• Outstanding tenant liabilities

Once the landlord and tenant agree how much should be repaid, the deposit should be returned within 10 days.

Where a dispute remains, the disputed amount continues to be protected until the matter is resolved.

The undisputed portion should not normally be withheld merely because another part is disputed.

What Happens When the Landlord and Tenant Disagree?

Each approved scheme offers an alternative dispute-resolution service.

The adjudicator considers documentary evidence from both parties and decides how the disputed deposit should be distributed.

Evidence may include:

• Tenancy agreement
• Deposit certificate
• Prescribed information
• Inventory and check-in
• Photographs
• Inspection reports
• Check-out report
• Invoices
• Quotations
• Rent statement
• Emails and messages
• Attempts to negotiate

The dispute service is not a replacement for good evidence. It cannot reconstruct the original condition of a property where no reliable inventory exists.

The parties may retain the right to use the courts instead, subject to the scheme’s procedures and applicable time limits.

What Happens If the Deposit Is Not Protected Correctly?

Failure to comply can have serious financial and legal consequences.

A tenant may apply to the county court where a deposit was not protected as required.

The court can order the landlord to:

• Repay the deposit to the tenant
• Pay it into an authorised scheme
• Pay financial compensation of up to three times the deposit

Government guidance confirms that the court may order compensation of up to three times the deposit, in addition to dealing with the deposit itself.

Depending on the circumstances, failures relating to separate tenancies, renewals or occupants may potentially create more than one claim. Landlords facing historic non-compliance should obtain specialist legal advice rather than assuming that late registration completely resolves the issue.

Deposit Protection and Possession Proceedings

From 1 May 2026, Section 21 was abolished for new possession action in the private rented sector in England, and landlords must use the applicable statutory possession grounds.

This does not make deposit compliance unimportant.

The landlord may still face:

• A tenant compensation claim
• Arguments raised within possession proceedings
• Delays while compliance issues are investigated
• Increased legal expense
• Difficulty demonstrating responsible management
• Regulatory scrutiny
• Disputes over the deposit and tenancy records

Current government possession guidance continues to refer to compliance with prescribed deposit requirements.

Changes During the Tenancy

Deposit records should be reviewed when there is a material change, such as:

• A tenant leaving
• A replacement tenant joining
• A change of landlord
• A change of managing agent
• A transfer from self-management to agency management
• A change in the deposit amount
• A change in scheme type
• A change in the person who paid the deposit
• A transfer of property ownership

The correct action depends on the scheme rules and the legal structure of the tenancy.

Do not simply amend the tenancy agreement without checking whether the deposit registration and prescribed information must also be updated.

Joint Tenancies

Where several tenants rent the property jointly, the deposit may be protected as one deposit relating to the joint tenancy.

A lead tenant may be nominated for scheme administration, but this does not necessarily mean that the deposit belongs exclusively to that person.

Landlords should record:

• All named tenants
• Who paid each amount
• The lead tenant
• Any relevant third-party payer
• Agreement concerning release of the deposit

Where one joint tenant is replaced, the scheme and tenancy records should be reviewed before the change takes effect.

Deposits Paid in Instalments

A landlord should take particular care where the deposit is accepted in more than one payment.

Each payment and protection deadline must be considered carefully. The scheme should be updated promptly as further money is received.

Landlords should not assume that the deadline begins only after the final instalment has been paid.

Specialist advice may be required where a historic deposit was collected irregularly or topped up later.

Deposit Replacement Products

Some providers offer deposit replacement or deposit alternative products.

These are not the same as a traditional refundable cash tenancy deposit.

Depending on the product:

• The tenant may pay a non-refundable fee
• The product may provide insurance or a guarantee
• The tenant may remain liable for damage or arrears
• Different claim procedures may apply
• The statutory deposit-protection rules may not apply in the same way because no cash tenancy deposit is taken

Landlords should understand:

• What the product covers
• The maximum claim
• Exclusions
• Evidence requirements
• Whether unpaid amounts can be recovered
• Whether the tenant understands that the fee may not be refundable
• The provider’s regulatory status and terms

A tenant should not be misled into believing that a non-refundable replacement fee will be returned like a cash deposit.

Landlord Deposit Protection Checklist

Before the tenancy:

• Confirm the tenancy type
• Calculate the maximum lawful deposit
• Record who paid the money
• Issue a receipt
• Choose custodial or insured protection
• Register within 30 days
• Complete the prescribed information
• Serve it on the tenant and relevant person
• Keep proof of service
• Prepare a detailed inventory and check-in report

During the tenancy:

• Keep the protection valid
• Update relevant changes
• Maintain rent and repair records
• Record inspections
• Retain invoices and correspondence
• Follow scheme renewal rules where applicable

At the end:

• Arrange a check-out
• Review rent and property condition
• Calculate reasonable deductions
• Allow for fair wear and tear
• Provide evidence
• Return the agreed deposit promptly
• Use the scheme dispute process where necessary

Frequently Asked Questions

Can I keep the deposit in my personal bank account?

Not simply because the deposit has been received.

Under a custodial scheme, the money is transferred to the protection provider.

Under an insured scheme, the landlord or agent may retain the deposit, but it must be held and administered in accordance with the scheme rules. It remains the tenant’s money and must not be treated as personal funds.

Can I protect the deposit myself?

Yes. A landlord may register directly with an authorised scheme and take responsibility for the protection, prescribed information, updates, repayment and disputes.

Can Yes Properties protect it for me?

Yes. We can arrange and administer deposit protection where included in your chosen lettings or management service or agreed as an additional service.

Which scheme does Yes Properties use?

Yes Properties is registered with the Deposit Protection Service under membership reference 4025820.

The protection method used for an individual tenancy will be confirmed in the relevant tenancy and deposit documentation.

Is custodial protection free?

Government-approved custodial schemes are generally free. The scheme holds the deposit for the duration of the tenancy.

Can I keep part of the deposit for redecorating?

Only where the tenant caused damage beyond fair wear and tear and the amount claimed represents a reasonable, evidenced loss.

The deposit cannot be used automatically to improve or refresh the property.

Do I need an inventory?

An inventory is not the act that legally protects the deposit, but it is one of the most important pieces of evidence when making a deduction.

Does late protection prevent a tenant from claiming?

Not necessarily. Late protection may reduce ongoing problems but may not remove liability for the original failure. Obtain legal advice concerning historic or late protection.

What happens if the tenant refuses to sign the prescribed information?

A refusal to sign does not necessarily prevent the landlord from serving the information. The landlord should retain clear evidence showing that the documents were provided correctly and on time.

What if someone else paid the deposit?

That person may be a relevant person and may also need to receive the required deposit information.

How quickly must an agreed deposit be returned?

Once the parties agree the repayment amount, it should be returned within 10 days.

Let Yes Properties Manage Your Deposit Compliance

Correct deposit protection involves more than placing money in a scheme.

It requires:

• Accurate calculation
• Timely registration
• Complete prescribed information
• Evidence of service
• Proper tenancy records
• A professional inventory
• Fair assessment of deductions
• Prompt end-of-tenancy administration

Yes Properties can manage this process for landlords who want the reassurance of professional support.

Our related services include:

• Let Only
• Rent Collection
• Full Property Management
• Deposit Protection
• Inventory and Check-In
• Inventory Check-Out
• Tenancy Renewals
• Rent-Arrears Support
• Property Inspections

Contact Yes Properties

Telephone: 0208 191 3717
Email: info@yesproperties.co.uk
Website: yesproperties.co.uk

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