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Your guide to paying a deposit when renting

Holly Thomas / 29 July 2016

When renting a property, you are expected to pay a deposit. Find out more…

A piggy bank stands outside a home to represent the deposit a renter must pay

When you sign up for a rental property you are expected to pay a deposit. This is usually one or two months rent, but there is no legal limit to the amount that landlords can ask for.

However, the money you hand over is protected by law. A landlord or letting agent must put your deposit in a tenancy deposit scheme (TDP) rather than pay it into a bank account of their own.

Once you have signed over your deposit your landlord or letting agent must put your deposit in the scheme within 30 days of getting it. Your landlord must use a TDP scheme even if your deposit is paid by someone else.

There are three government-backed deposit schemes they can choose from - the Deposit Protection Service, MyDeposits or The Dispute Service.

You will then have access to a tenancy deposit protection certificate which will have a unique code to prove the money is legally tucked away.

How to become a landlord

What do the schemes do?

Since 2007, it has been the law in England, Wales and Northern Ireland that your deposit must be protected in one of these three government-approved schemes. Failure to do so means a landlord may be taken to court and fined three times the sum of the deposit.

Each deposit scheme is required to make sure you’ll get your deposit back if you meet the terms of your tenancy agreement, don’t damage the property and as long as you pay your rent and bills.

When the tenancy ends, the deposit has to be returned in full — and the tenant sent another certificate — unless mutually agreed deductions are made. Otherwise, the dispute resolution service automatically comes into play.

What about a holding deposit?

You might be asked for a holding deposit when you agree to rent a property to make sure it comes off the market and no-one else can snap it up. By paying this deposit, you commit to taking up the tenancy but it’s not part of the tenancy deposit unless you’re told so.

Deposit dispute

Your tenancy deposit protection scheme offers a free dispute resolution service if you disagree with your landlord about how much deposit should be returned.

You don’t have to use the service but if you do, both you and the landlord have to agree to it. You’ll both be asked to provide evidence, and the decision made about your deposit will be final.

Alternatively, if you think your landlord hasn’t used an approved deposit scheme when they should have, you can apply to your local county court and you could be due compensation of up to three times the value of your deposit.

Thinking of becoming a landlord yourself? Find out more about Saga's landlord insurance packages.

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.