#AskTDS: "Can I hold my tenant's deposit?"
In this week’s #AskTDS blog, we answer a popular question from landlords, “can I hold my tenant’s deposit?”
Types of deposit protection
With the protection of deposits being a legal obligation since 2013, 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. In TDSNI Custodial we 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 TDSNI adjudication service. TDSNI will release any undisputed amounts and retain only the amount in dispute.
The other method of protecting a deposit, TDSNI 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 the deductions, the landlord must pass the disputed amount to TDSNI 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 TDSNI to hold during the dispute. After gathering evidence from both parties, the adjudicator will then make an award to the landlord, the tenant, or split between 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 TDSNI insured scheme. At the end of the tenancy if there is a dispute, the disputed amount must be given to TDSNI to secure during the adjudication.
TDSNI 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 deposit disputes page.
For more landlord tips please view our landlord FAQ page.
Tenancy Deposit Scheme (TDS) is a Government-approved scheme for the protection of tenancy deposits; TDS offers both Insured and Custodial protection and also provides fair adjudication for disputes that arise over the tenancy deposits that we protect.
We provide invaluable training in tenancy deposit protection and disputes for agents and landlords through the TDS Academy as well as joining with MOL to provide the Technical Award in Residential Tenancy Deposits.
TDS Insured Scheme: where a TDS member can hold the tenancy deposits as stakeholder during the term of the tenancy.
TDS Custodial Scheme: where TDS hold the deposit for the duration of the tenancy.
TDS Academy: TDS provides property professionals with invaluable training in tenancy deposit protection and tenancy deposit disputes.
TDS Northern Ireland: TDS is Northern Ireland's leading and only not for profit tenancy deposit protection scheme.
TDS can only comment on the process for our scheme, other deposit protection schemes may have a different process/require different steps. Content is correct at the time of writing.
These views are those of the author alone and do not necessarily reflect the view of TDS, its officers and employees.