How Do Tenancy Deposits Work?

When renting a house or flat in the UK, landlords and letting agents charge a deposit when you start your tenancy. A deposit is normally anything from 4 weeks to 6 weeks of the rental cost of the place you want to rent.

So if a house or flat is £1,000 per month to rent, you might be expected to pay a £1,000 deposit (same as 4 weeks rent) or £1,500 (same as 6 weeks rent). Giving a large chunk of your hard-earned cash to a landlord or letting agent might seem like a daunting prospect, and for many years it was more than just that.

The deposit was paid to the landlord or letting agent for them to keep, then at the end of the tenancy if there was any damage to the property or furnishings, money was taken from the deposit to pay for the repairs or replacement.


The Problem

But criminal landlords and letting agents learned they could do a runner with tenant’s money, some wouldn’t give any money back to the tenant at all, others just spent it.


The Solution

So back in 2007, Government regulation came in to effect, under the provisions of the United Kingdom Housing Act 2004 stating that every landlord or letting agent that makes an assured shorthold tenancy in England and Wales must protect the tenant’s deposit using an authorised tenancy deposit scheme.

Great news for tenants! No more dodgy landlords saying “Nah mate, it’s fine, I’ll give you the cash back when you move out.” no more letting agents saying “No need to worry, well keep it in the safe and you’ll probably get it back when you leave.”

Deposits were now tucked away in one of three Government-backed schemes where the tenant’s money is kept away shifty landlords and letting agents. But with an added bonus for the tenant; a 3rd party will be making any decisions about who gets what from the deposit money. No longer does the landlord or letting agent make their own decision, it’s all handled by unbiased, 3rd party adjudicators.


But Wait, There’s More!

Putting to one side the incredible amount of landlord and letting agents who still don’t protect their tenant’s deposits, even though tenants can take them to court and claim up to three times the amount back,
Putting to one side the unbelievable, ethically criminal deductions some landlords and letting agents make from deposits,
Putting to one side the fact that this legislation was put in place to because landlords and letting agents couldn’t be trusted with their own customers hard earned money, there’s a more interesting, unnerving and unsettling issue that needs looking at.

Three Is The Magic Number

There are three government-backed tenancy deposit schemes:
Deposit Protection Service, normally known as ‘DPS’
Tenancy Deposit Scheme, normally known as ‘TDS’.

What’s the difference between them all?
There shouldn’t be any difference, they all do exactly the same job as stated in Chapter 4 of the Housing Act 2004:
1. Store tenant’s deposit money
2. At the end of the tenancy determine how much of the deposit needs to be returned to the landlord or letting agent to cover any damages to the property or furnishings.


Who Are The Magic Three?

Tenancy Deposit Scheme (TDS) is a trading name of ‘The Dispute Service Limited’
Company number: 04851694
Registered address: Unit 1, The Progression Centre, 42 Mark Road, Hemel Hempstead, Herts HP2 7DW

MyDeposits is a trading name of ‘Tenancy Deposit Solutions Limited’
Company number 05861648
Registered address: First Floor, Lumiere, Elstree Way, Borehamwood, Hertfordshire, WD6 1JH

Deposit Protection Service (DPS) is a trading name of ‘Computershare Investor Services Plc’
Company number: 03498808
Registered address: The DPS, The Pavilions, Bridgwater Road, Bristol, BS13 8AE


Dig A Little Bit Deeper

But who runs these?
Who are they managed by?
Who owns them?

MyDeposits is owned and managed by the same people who own and manage National Landlord Association and UKALA.

From the MyDeposits website: (click the image)

TDS is owned directly by NFOPP who own and manage the Residential Landlord Association and ARLA/Propertymark.

From the TDS website: (click the image)

Renters, if your deposit is being held by MyDeposits or TDS the decision on how much of your money is returned to you is made by organisations who are owned or managed by landlord associations and letting agent associations.
Landlord associations and letting agent associations don’t have tenants interests at heart, they’re focused on their members interests.
When making a final decision about where your money goes, do you think they’re more likely to side with the tenant or with their member landlords and letting agents?

UKALA (linked to the NLA) even offers their members a discount if they use MyDeposits.
From the NLA website: (click the image)

TDS does the same thing by offering discounted rates to RLA members ‘in recognition of their membership of the association.
From the RLA website: (click the image)

Why Does This Matter?

If you’re asking why two out of the three deposit protection agencies are owned, operated and managed by organisations who only have landlords and letting agent’s interests at heart, then you’re asking the right question.

To recap, the deposit protection agencies job is to:
1. Store tenant’s deposit money
2. At the end of the tenancy determine how much of the deposit needs to be returned to the landlord or letting agent to cover any damages to the property or furnishings.

How can the TDS and MyDeposits do this impartially, without prejudice and in an unbiased fashion when they’re in bed with the RLA, ARLA and the NLA?


What Can Renters Do About This?

Ask your landlord to put your money with the DPS, not with the TDS or MyDeposits.

What do you think renters should do?
A thread has been started on the renters forum to discuss the points raised in this post.