There are two types of tenancy deposit protection : custodial and insurance-based. This offers flexibility to landlords, but both types of scheme are designed to fully protect the deposit and operate fairly for both landlord and tenant.
Custodial scheme:
In a custodial scheme, the landlord transfers the full deposit paid by the tenant to the scheme, where it is held until the tenancy comes to an end.
During this time, the money accrues a small amount of interest, which is used to pay for the administrative costs of the scheme – which means that, usually, custodial schemes are free of charge.
At the end of the tenancy, both landlord and tenant can contact the relevant TDP scheme to request that the money is returned as they see fair. If any disputes should arise, then the TDP scheme will hold the money until either…
Insurance-based scheme:
An insurance-based scheme differs because the money is kept by the landlord or letting agent, allowing them to operate with it during the tenancy.
This is possible because the landlord or letting agent pays the TDP scheme a fee. At the end of the tenancy, the landlord decides on any deductions to be made. In the case of any dispute, the landlord must transfer to the tenant any portion of the money which isn’t disputed, and the disputed portion must be transferred to the TDP scheme immediately.
If a landlord does not fulfil his requirements with the TDP scheme, then the scheme will pay the tenant the full amount owed and deal with the landlord themselves.
Does it matter which type of scheme my landlord uses?
No. As a tenant you don’t need to worry about which TDP scheme your landlord has chosen, because both types protect your money. However, you must ensure your landlord has protected your deposit in one of them.
How do I know whether my deposit is protected or not?
You can find out whether your deposit is protected, by checking online with the three government-backed TDP schemes:
If your landlord has failed to protect your deposit, you may be able to claim compensation up to three times the value of the deposit. Call one of our expert housing solicitors today to find out more.