Deposits and Tenancy Deposit Schemes

Many landlords take a tenancy deposit to cover the tenant’s obligations. Typical examples include damage beyond fair wear and tear, cleaning required by the tenancy, or unpaid rent.

At the end of the tenancy, the deposit should be returned to the tenant, minus any deductions that are both:

• allowed by the tenancy agreement; and
• agreed with the tenant or backed up with proper evidence.

If the agreement does not permit a particular type of deduction, it is usually difficult to justify retaining the deposit for it.

The law requires deposits taken for assured periodic tenancies to be protected in an authorised scheme, and for specific (prescribed) information to be given to the tenant and anyone else who paid the deposit.

Requiring a deposit

You can ask for a tenancy deposit before the tenant moves in, but deposit caps apply.

For tenancies (and renewals), the maximum tenancy deposit is:

• five weeks’ rent where the annual rent is under £50,000; or
• six weeks’ rent where the annual rent is £50,000 or more.

In practice, landlords tend to set a deposit that matches the risk of the letting while staying competitive. Push it too high, and you may deter strong applicants.

Which tenancies are covered

The deposit protection rules apply to assured periodic tenancies. In England, this covers most private-rented-sector tenancies.

There are rare transitional cases in which protection is not newly required (see “Transitional provisions” below). For most landlords, the working assumption is simple:

• if you take a deposit for an assured tenancy, you must protect it and give the prescribed information.

Protecting a deposit

Where deposit protection applies, you must do all of the following:

• deal with the deposit in line with an authorised tenancy deposit scheme from the moment you receive it;
• meet the scheme’s initial requirements within 30 days of receiving the deposit; and
• give the prescribed information to the tenant (and any relevant person) within 30 days of receiving the deposit.

The 30-day deadline begins when you receive the deposit, even if that occurs before the tenant moves in. Example: If the deposit is paid in January but the tenancy starts in September, the 30-day period still runs from January.

Renewals and “re-protecting”

If the deposit was protected correctly when you first received it, and the prescribed information was served correctly, you do not usually need to protect it again on renewal, as long as:

• the deposit stays in the same scheme; and
• the landlord, tenant(s), and property stay the same.

Check your scheme rules. Some schemes want you to confirm details when a tenancy changes.

Penalties and the practical consequence: possession

Financial penalty

If the landlord does not protect the deposit (or does not comply with the deposit requirements) within the 30-day timeframe, the tenant (or relevant person) can apply to court for:

• a penalty of 1 to 3 times the deposit (the court decides the amount); and
• an order that the deposit is protected or returned, depending on the facts.

A claim can be brought during the tenancy or up to 6 years after the tenant has left.

Deposit compliance as a “possession gatekeeper”

Deposit non-compliance is now mainly felt through restrictions on possession orders after serving a section 8 notice on one of the grounds.

Where a deposit has been paid in connection with an assured tenancy (including one that used to be an AST), the court may only make an order for possession if, in summary:

• the deposit is held in accordance with an authorised scheme; and
• the scheme’s initial requirements that should have been complied with on receipt have been complied with (even if late); and
• the landlord has complied with the prescribed information requirements.

If the deposit position is wrong, the issue is not “you can’t use a no-fault route”. The real risk is that you may be blocked from getting a possession order on most grounds until you put the deposit position right.

Late protection: how late is “too late” for possession purposes?

For section 8 possession purposes, you can still protect the deposit and serve prescribed information after the 30 days, as long as you do it before the court makes the possession order.

That does not remove any financial penalty exposure. However, it can remove the possession bar if you address it in time.

Exceptions where the deposit possession bar does not apply

The possession restriction does not apply where:

• possession is sought on the anti-social behaviour grounds Ground 7A or Ground 14 (Schedule 2 Housing Act 1988); or
• the deposit has been returned to the tenant in full (or returned with agreed deductions); or
• a county court application under section 214(1) has been determined, withdrawn, or settled.

Checklist before starting possession action

If you are considering possession proceedings for an assured tenancy where a deposit was taken, check this early:

• is the deposit currently protected in an authorised scheme?
• were the scheme’s initial requirements met (even if late)?
• have the tenant (and any relevant person) received the prescribed information?
• if there was a historic failure, should you remedy compliance now, or return the deposit (where appropriate) to remove the possession bar?

Prescribed information

Protecting the deposit is only half the job. You must also give the prescribed information within 30 days of receiving the deposit.

The prescribed information is detailed. It includes (among other things):

• the deposit scheme administrator’s contact details
• scheme information explaining how the scheme works
• how the deposit will be repaid at the end of the tenancy
• what happens if either party cannot be contacted at the end of the tenancy
• how disputes are handled, including ADR
• the amount of the deposit
• the property address
• landlord and tenant details (including tenant post tenancy details)
• relevant person details (if someone else paid the deposit)
• what the deposit can be retained for (by reference to the tenancy terms)
• a certificate signed by the landlord confirming the information is accurate

A web link to the scheme rules is not enough. You must provide the required information.

Timing and validity

Prescribed information is often included in the tenancy agreement and can be signed as part of the tenancy pack. However, one court has held that information provided before the landlord receives the deposit may be invalid.

If you routinely sign the tenancy, including the prescribed information, before receiving the deposit, a safe approach is:

• protect the deposit promptly after you receive it; then
• give the tenant(s) the signed tenancy bundle containing the prescribed information, together with the deposit protection certificate.

Prescribed information and agents

If an agent protects the deposit, the prescribed information need not specifically name the landlord. References to “the landlord” may refer to the landlord or the agent.

In practice, consistency is safer. If the tenancy agreement names the landlord, use the landlord’s details in the prescribed information. If the agent is clearly named as acting, the agent’s details can be used.

Serving prescribed information

Commonly, prescribed information is included in the tenancy agreement and signed in the tenancy pack. After you receive and protect the deposit, send the tenancy bundle (including the prescribed information) and the protection certificate using your normal service method.

• Follow the service clause in your agreement. Common methods include first-class mail to the property, hand delivery, or email (if the agreement permits email service).
• Address the covering email/letter to all tenants, and keep evidence of service (certificate of posting, photo of delivery, sent email records).
• Joint tenants: one communication addressed to all joint tenants (or a nominated lead tenant) is often treated as enough if each tenant is named in the documents, but sending each named tenant their own copy is the safer option.

For more on service, see our Service of Notices guide.

Types of schemes

Authorised schemes are either:

• custodial (the scheme holds the deposit; usually free); or
• insurance (the landlord/agent holds the deposit and pays a fee).

All authorised schemes offer Alternative Dispute Resolution (ADR). ADR is optional. Either party can still go to court, but you generally cannot use ADR and the court for the same dispute. Courts also expect reasonable efforts to resolve disputes without litigation where possible.

Authorised tenancy deposit scheme providers

There are three authorised schemes:

• The Deposit Protection Service (DPS)
• The Dispute Service (TDS)
• mydeposits

Learn the rules of the scheme you use. If you miss deadlines or your documents are not in the form the scheme expects, an adjudicator may award the deposit to the tenant by default, even if you think your deductions are reasonable.

Withholding part of the deposit

If your tenancy agreement allows it, the deposit can cover:

• damage
• outstanding debts attached to the property
• cleaning and other breaches of tenant obligations
• non-payment of rent
• other breaches of the tenancy

When you assess damage, you must allow for fair wear and tear. Normal wear and tear is not covered by the deposit. You should not expect the property to be in identical condition at the end of a typical tenancy.

If you want deductions, you should:

• list them clearly;
• back them with evidence (inventory, check-in/check-out reports, photos, invoices/quotes); and
• try to agree with the tenant quickly.

Do not retain the entire deposit solely to pressure the tenant into accepting deductions.

Returning the deposit

There is no fixed statutory deadline for returning a deposit. It is still sensible to inspect, gather evidence, and obtain quotes before finalising deductions.

In practice, a tenant can usually ask the scheme to release the deposit if it has not been returned within 10 days of becoming due. The scheme will contact the landlord, who can provide evidence if there is a dispute or a genuine reason for delay.

Repayment depends on the scheme type:

• custodial: the landlord/agent requests repayment through the scheme portal
• insurance: the landlord/agent returns the deposit directly (for example, by bank transfer), but if there is a dispute, you may have to pay the disputed amount into the scheme while ADR or another process runs

Relevant person (third-party payer)

If someone else provides the deposit money, that person is a relevant person. You must also provide them with the prescribed information.

This often arises in student lets (where parents pay deposits) or when a local authority provides funding rather than a guarantee. A relevant person can also claim penalties if the prescribed information was not served or the scheme requirements were not complied with.

Lead tenant / nominated tenant

Some schemes use a lead or nominated tenant where more than one person has an interest in the deposit (for example, joint tenants, parents, or local authorities).

All interested parties should agree on the lead tenant. Consider the practical implications if the lead tenant leaves mid-tenancy, and keep the scheme records up to date if circumstances change.

When can holding deposits, rent, and tenancy deposits be requested or received?

A holding deposit of up to one week’s rent is allowed before the tenancy is granted, to reserve the property while checks are carried out. It is the only amount that can be expressly retained before a tenancy is entered into.

A tenancy deposit is money held as security for the tenant’s obligations or liabilities arising under or in connection with the tenancy.

If a tenant pays a tenancy deposit but withdraws before the tenancy is entered into (i.e., before it is signed and legally binding), the deposit will generally need to be returned in full. If there is no tenancy, it is hard to argue that the money is security for obligations “under or in connection with the tenancy”.

There is also a timing risk: deposit protection deadlines run from receipt. If you take a tenancy deposit too early and the tenancy is not entered into within 30 days, you may be unable to comply properly because there is no tenancy to register.

A sensible order of payments is:

• before signing: take a holding deposit (up to one week’s rent)
• after the tenancy has been entered into (signed and legally binding): take the tenancy deposit (taking account of the holding deposit) and the first rent payment

Rent is now expressly restricted, so it cannot be received until after the tenancy has been entered into, and rules also limit how much rent can be required in advance.

Previous assured (non-shorthold) tenancies (rare)

For existing tenancies on 1 May 2026, the deposit amendments do not apply to an existing tenancy that, immediately before the commencement date, was an assured tenancy other than an assured shorthold tenancy (Schedule 6, paragraph 11 RRA 2025).

This applies to the unusual situation where, before 1 May 2026, the tenancy was an assured tenancy (not an AST) that did not require deposit protection. In those cases, the reforms do not require that the deposit be protected solely because the law changed.

Rare transitional cases: old AST deposit rules still apply

A small number of assured shorthold tenancies may still be governed by the old rules after 1 May 2026. That happens where a section 21 notice or section 8 notice was served before 1 May 2026 and is still live, or where possession proceedings based on that notice are still underway. In those cases, the tenancy stays under the old AST regime until the notice expires or the proceedings finish.

For deposit purposes, this matters because the old section 21 rules still apply. The new possession gateway does not.

In summary:

• If the deposit was not protected within 30 days of receipt, a section 21 notice cannot be served unless the deposit has first been returned in full, or returned subject to deductions the tenant has agreed.
• Late protection on its own does not bring back the right to serve section 21.
• If the deposit was protected in time but the prescribed information was given late, section 21 can usually still be served once that information has been given before the notice is served.
• In either case, the tenant may still claim the usual financial penalty of 1 to 3 times the deposit.
• Unlike the post-1 May 2026 regime, deposit non-compliance under the old AST rules did not usually act as a broader bar to possession under section 8.

If you are relying on agreed deductions before serving section 21, get that agreement in writing. The relevant provisions are in sections 213 to 215 of the Housing Act 2004 as they were before the changes introduced by the Renters’ Rights Act 2025.

Bottom line

If you take a deposit for an assured tenancy, assume you must protect it and serve prescribed information on time.

The main change is that deposit non-compliance is best treated as a possession gatekeeper. In most possession cases, you need deposit compliance (or a clear exception) before the court can make a possession order. If you missed the 30-day deadline, late compliance can still fix the possession problem if you put it right before the order is made, but it does not take away the risk of a financial penalty.