Dont forget to Deregister Tenant Deposits

It is a legal requirement that a rental deposit is registered with a government approved tenancy deposit scheme within 30 days of the deposit being paid. Getting a deposit registered isn’t normally an issue as it forms part and parcel of the check-in and upfront payment process. The issue often comes at the end of the tenancy where de-registering the deposit fails to happen. In this article we will take a look at the tenancy deposit protection schemes and the issue around forgetting to de-register tenant’s deposits at the end of the tenancy.

Wooden house on top of a calculator.

What is the tenancy deposit scheme?

Started in 2007 the deposit protection schemes are independent schemes which protect a tenant’s deposit so that at the end of the tenancy, if they have adhered to the terms of the tenancy, haven’t caused damage to the property and have paid all bills and rent, all of the deposit is returned. These schemes also provide a dispute service which provides adjudication if a dispute does arise.

There are 3 schemes:

  • Deposit Protection Service
  • My Deposits
  • Tenancy Deposit Scheme

What are the Schemes?

Each scheme offers two ways of protecting a deposit which are custodial and insured. With a custodial scheme, which is free, the deposit protection scheme itself, keeps the money in its own bank account. Their fee is effectively paid by the interest earnt. With an insured scheme, the landlord or agent keeps the deposit in their own account and pays a fee to the deposit protection scheme to register and insure the deposit. At the end of the tenancy, the landlord or agent will pay the tenant back their deposit personally rather than releasing the deposit through the protection scheme. So, what is the problem? Quite often the insured schemes are a pay monthly scheme where a monthly payment is paid to the scheme for each deposit held. For landlords with large portfolios, who chose to hold the tenant’s deposits themselves, this can be a reasonable sum of money being paid.

It is quite easy, though, to pay back the deposit to the tenant and then forget to de-register with the deposit protection scheme. In these instances, the landlord or agent will continue to pay the scheme the required fee, whilst not actually having the deposit anymore. If this is not caught, then the fees can mount up over time. This is different to the custodial scheme as it will automatically end once the scheme provider has returned the deposit to the tenant.

To avoid this, a landlord or agent should build it into their rental routine to check that insured deposits are de-registered once the deposit to which the insurance applies has been paid back. Setting this routine up will ensure that the fee paying ends at the end of the tenancy and ensure that landlords are not paying more fees than they need to.