Ask TDS "Can I hold my tenant's deposit?"

The Tenancy Deposit Scheme (TDS) is a government approved scheme for the protection of tenancy deposits; we offer both insured and custodial protection. We also provide fair adjudication for disputes that arise over the deductions from the tenancy deposits that we protect. This article has been written in response to a landlord's query: "Can I hold my tenant's deposit?"

Types of deposit protection

With the protection of deposits being a legal obligation since 2007, it is still worth reminding landlords of the various options available to them, particularly those who are renting out a property for the first time. If you take a deposit from your tenant, there are two different methods of deposits protection available to landlords: custodial and insured. 

Custodial deposit protection is a completely free service but it does mean that landlords need to hand over the full deposit for safe-keeping. The Tenancy Deposit Scheme (TDS) will then hold onto the deposit on your behalf, and then release it at the end of the tenancy in accordance with the tenant and landlord's instructions. If the tenant does not agree with the landlord's claim, they can ask for it to be resolved by the TDS adjudication service. TDS will release any undisputed amounts, and retain only the amount in dispute.


The other method of protecting a deposit, insured, means that the landlord can hold the tenant's deposit in an account of their choosing. The landlord pays a fee per tenancy to insure the deposit, allowing them to retain the full amount of the deposit for the length of the tenancy. The landlord is responsible for returning the deposit to the tenant at the end of the tenancy, less any agreed deductions. In cases where the tenant disputes one or all of the deductions, the landlord must pass the disputed amount to TDS to hold during the adjudication process.

This means if the full deposit is £1000, and the tenant agrees to the landlord's claim of £300 for redecoration, but not their claim of £200 for cleaning, the landlord would keep £300, repay £500 to the tenant and pay £200 to TDS to hold during the dispute. After gathering evidence from both parties, an adjudicator will then make an award to the landlord, the tenant, or split between to both parties.

Can a landlord hold on to the tenant's deposit?

In conclusion, yes a landlord may hold their tenant's deposit, but it will need to be protected in the TDS insured scheme. At the end of the tenancy if there is a dispute, the disputed amount must be given to TDS to secure during the adjudication.

TDS recommends that in order to avoid disputes, landlords should communicate clearly and often with their tenants. For more advice on disputes and how to avoid them, visit our blog.

Posted by Zoe Knighton on 27 January 2017

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