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Those landlords that have been taking a deposit from their tenant since 6th April 07 should know that they need to use either the “custodial” scheme where a third party holds the deposit or one of the two “insurance” backed schemes allowing the landlord to hold it. A landlord also has to tell tenants which scheme they are using within fourteen days of receiving the deposit by issuing them with information as prescribed by section 213 of the Housing Act 2004.

If a landlord takes a tenancy deposit and doesn’t use one of the approved schemes, penalties include having to pay the tenant an amount of three times the deposit. Also, a landlord will be unable to regain possession under the so-called “accelerated possession procedure” using a section 21 Notice.

Landlords shunning deposits

Evidence has emerged that a significant number of landlords are not taking a tenancy deposit at all. A recent reader survey by “Landlord” magazine show that 23% of landlords surveyed are choosing not to take a deposit at all leaving them potentially open to bearing the financial costs of incurring damage to their property.

NEW product

These landlords who do not take a tenancy deposit should consider using the new product developed by the Alan Boswell Group.

This insurance covers a landlord against any damage to the buy-to-let investment property caused by a tenant providing that the damage is discovered within 14 days of the end of the tenancy. The damage must account for at least £100 and a landlord is covered up to £1000 in each period of insurance. The premium is annual and therefore could apply to more than one tenancy agreement.

The cover is subject to each tenant named on the tenancy agreement passing a satisfactory tenant reference via Keysafe (UK) Ltd.

The annual cost is £42 including 5% Insurance Premium Tax, reducing to £26.25 including tax for members of the National Federation of Residential Landlords (NFRL) or affiliated organisations. The cover is only available as an addition to an existing Alan Boswell landlord’s insurance policy and will follow the terms, exceptions and conditions of the main buildings insurance policy.

Insurance coming up for renewal? – read this article onwhat you need to know.

This product is particularly attractive to landlords that whilst wanting to protect themselves against damage caused by tenants do not want to appear on any Government database. Not taking a deposit is sometimes an advantage for landlords when marketing their buy-to-let property to certain tenants groups.

Custodial scheme most popular
For those landlords that are using the approved schemes, the most popular by far is the free custodial scheme operated by the Deposit Protection Service . The survey of readers of Landlord magazine revealed almost 50% of respondents were using this tenancy deposit scheme.

Deposit Protection Service had as of the 12 November 2007 a total of 61,522 agents and landlords registered with the scheme and had taken 147,911 deposits. The Deposit Protection Service has now returned over 4,700 deposits totalling £2.5 million. They claim that all money is now repaid in just 5 days from completion of the claim process.

Reclaiming a landlords deposit

Currently Deposit Protection Service reports that more than 50% of all requests from landlords for a deposit repayment are delayed. This is because they claim that landlords and tenants have forgotten to include their unique repayment IDs. Landlords should be aware that for a successful joint deposit repayment to be made, and to protect each party against fraud, both the landlord’s and tenant’s repayment IDs must be submitted. (a landlord’s unique ID number is 5 digits long and can be found on their deposit confirmation letter sent by The Deposit Protection Service five days after a deposit has been submitted.)

Once a tenancy is ended then to initiate the repayment of a deposit, either the landlord/agent or the tenant needs to login to their account and complete an online form.


1. Both the landlord/tenant complete the online form together, including both their unique IDs. To see a diagram see here


2. The landlord initiates the claim by completing the online form and submitting their repayment ID. This submission will automatically generate a notification to the tenant to complete their details, including their unique ID.


3. The tenant initiates the claim by completing the online form and submitting their repayment ID. This submission will automatically generate a notification to the landlord to complete their details, including their unique ID.

Repayment IDs are used as a security measure to ensure the deposits cannot be claimed by one party (for instance the tenant) without the consent of the other (i.e. the landlord) or indeed by anyone else. The tenant and the landlord do not have the same repayment ID as they are unique to each party.

If a landlord has forgotten or lost their repayment ID, they are advised by the Deposit Protection Service to submit an online request. A landlord can do this by:

1. login on to their account
2. selecting view my deposits and selecting the relevant deposit
3. select repayment ID reminder and choose how a landlord wishes to receive the information
4. the information will be sent the following day

Alternatively a landlord can phone them on 0870 707 1707 if they would like a paper form to initiate the repayment of a deposit.

New developments

Currently, when a landlord initiates a repayment, the request for a tenant response is sent to the tenancy address. However, in a number of instances, the tenant has already moved to another address and has not recorded this against their account. During the week commencing 19 November 2007, the Deposit Protection Service are introducing the facility for landlords to record the forwarding address. This will speed up the process of contacting the tenant and the payment of the deposit.

Landlords can find out more

Landlords who are keen to find out more about the Deposit Protection Service can do so by attending the Landlord Show at the Birmingham NEC on the 6 December 2007. The event is open between 12:30 – 19:30 and The Deposit Protection Service are speaking at 15:00 and 17:00. To find out more about this event landlords should go to the Landlord Show .

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