Ask TDS: Who gets the interest on the tenancy 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 tenancy deposits that we protect. This article has been written in response to a Landlord’s query: “Who gets the interest on the tenancy deposit?”


As with many of these questions, the answer usually lies in the tenancy agreement. It is always best to lay out all aspects of the tenancy in the agreement so that questions like this can be easily answered.

 

The answer also depends on the type of deposit scheme you have chosen to use.

If you are using a Custodial Tenancy Deposit Scheme

A Custodial scheme is free to use, as the deposit scheme is funded by the interest generated from all the deposits held by the scheme.If you are using a custodial scheme you do not need to include any information in your tenancy agreement about the interest on the deposit.

If you are using an Insured Tenancy Deposit Scheme

An Insured scheme allows the landlord to hold the deposit in an account of their choosing for the duration of the tenancy for a small fee. In this case, to avoid any arguments later down the line it is best practice to include information in the tenancy agreement about who is entitled to any interest earned during the tenancy. If there is no mention of the interest in the tenancy agreement then an argument could be made that the interest belongs to the tenant, as it is technically the tenant’s money.


It is essential that the tenancy agreement covers all aspects of the tenancy to prevent uncertainty. Our blog covering what a tenant’s deposit can and can’t be used for may also be useful.


Posted by Zoe Knighton on 2 June 2017

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