This briefing paper explains the duty on private landlords to protect tenants’ deposits and summarises how the schemes operate. The Government has legislated to cap security deposits in England and has issued a call for evidence on barriers to moving deposits between tenancies.

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Issues with recovering deposits

In June 1998 the National Association of Citizens Advice Bureaux (NACAB) published a report based on CAB clients’ experience of the payment of tenancy deposits. In the light of evidence highlighting the difficulties faced by tenants trying to reclaim their deposits from private landlords, NACAB concluded that the case for reform was ‘overwhelming’ and that the failure to regulate deposits damaged the image and reputation of the private rented sector.

The introduction of mandatory protection

Provisions were added to the Housing Act 2004 to place a duty on ‘the appropriate national authority’ to establish at least one statutory tenancy deposit scheme. Tenancy deposit protection schemes (TDP) became operational from 6 April 2007 in respect of assured shorthold tenancies created in England and Wales after that date.

Scotland and Northern Ireland have also legislated to make protecting deposits mandatory. 

The number of protected deposits

There were 3.7 million deposits, worth an average of £1,110 each, protected in England and Wales at the end of March 2018. Over 2017-18 around 31,865 dispute adjudications were completed (also in England and Wales).

Amendments to the TDP schemes in England and Wales

The legislation governing mandatory TDP in England and Wales has been modified several times. The Localism Act 2011 amended (with effect from 6 April 2012) sections 213 and 214 of the Housing Act 2004 to resolve issues arising from several court cases. The amendments ensured that landlords who had failed to protect a deposit could continue to serve a section 21 notice to terminate a tenancy if they did eventually protect the deposit. However, the changes also made it clearer that late protection of a deposit would be subject to a financial penalty determined by the courts.

The Deregulation Act 2015 tackled further issues arising from case law. The Act clarified that, for those tenancies starting before 6 April 2007 but renewed or rolling into a statutory periodic tenancy after that date, any initial deposits received would need to be protected by a TDP. This Act also provided that a section 21 notice could not be served if a deposit was not protected even if the tenancy (AST or statutory periodic) started before 6 April 2007.

Further attempts to amend the TDP scheme were made as the Housing and Planning Act 2016 progressed through Parliament. None of the proposed amendments were made.

Capping deposits

In England, the Tenant Fees Act 2019 has placed a cap on the amount of security deposit that a tenant can be required to pay in respect of new tenancies created after 1 June 2019, including renewals of existing tenancies.

A cap has applied in Scotland since 1984. There is no cap in Northern Ireland. RThe enting Homes (Fees etc.) (Wales) Act 2019 contains a power to cap deposits through regulations.  For more details see section 4 of the paper.

Ongoing issues and a call for evidence

Critics of the TDP point to the number of non-compliant landlords; the length of time it can take to resolve disputes; and the persistent loopholes and abuses of the schemes.

The Ministry of Housing, Communities and Local Government launched a call for evidence on Tenancy Deposit Reform in June 2019 through which it is seeking to understand the barriers tenants face when moving between tenancies.  Submissions are accepted up to 5 September 2019.

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