How to Protect a Tenant's Deposit: TDS, DPS, and MyDeposits Explained

If you take a deposit from a tenant in England, you must protect it in a government-approved tenancy deposit scheme within 30 days. There are no exceptions, no grace periods, and no excuses. Failure to comply can cost you thousands of pounds in compensation and prevent you from regaining possession of your property.

Despite this being a legal requirement since 2007, we still encounter landlords in Middlesbrough and across Teesside who either do not protect deposits correctly or do not understand the rules. This guide explains everything you need to know.

The Three Approved Schemes

There are three government-approved deposit protection schemes in England:

1. Tenancy Deposit Scheme (TDS)

TDS offers both custodial (free) and insured options. It is the scheme used by many letting agents and has a well-established dispute resolution process.

• Custodial (free): You hand the deposit to TDS, who hold it for the duration of the tenancy. At the end, both parties must agree on any deductions before the deposit is released.
• Insured (paid): You keep the deposit in your own account but pay TDS an annual fee for insurance cover. TDS will pay the tenant if you fail to return the deposit. Typical cost is around £20-£30 per deposit per year.

2. Deposit Protection Service (DPS)

DPS operates a custodial-only model and is entirely free to use. You transfer the deposit to DPS, who hold it in a secure account. At the end of the tenancy, either party can initiate the return process.

DPS is the most straightforward option for individual landlords. There are no fees, the online platform is simple to use, and the dispute resolution service is included.

3. MyDeposits

MyDeposits offers both custodial (free) and insured (paid) options, similar to TDS. It is widely used by both agents and private landlords.

• Custodial (free): MyDeposits hold the deposit.
• Insured (paid): You hold the deposit and pay an annual premium. Costs are similar to TDS insured.

Custodial vs Insured: Which Should You Choose?

Custodial schemes are free and the simplest option. You transfer the deposit to the scheme, and they manage it. The downside is that you do not have access to the funds during the tenancy.

Insured schemes allow you to keep the deposit in your own account, which some landlords prefer. The downside is the annual fee and the administrative requirement to pay the premium on time — if your insurance lapses, the deposit is no longer protected.

For most landlords in Middlesbrough managing a small number of properties, we recommend the custodial DPS. It is free, simple, and removes any risk of accidentally letting cover lapse.

For agents and landlords with larger portfolios, insured schemes offer cash flow advantages, but the administrative burden must be managed carefully.

The 30-Day Rule

You must protect the deposit within 30 calendar days of receiving it. This is not 30 days from the start of the tenancy — it is 30 days from the date the money is received.

In practice, this means that if a tenant pays a deposit on the 1st of the month and the tenancy starts on the 15th, the clock starts on the 1st. Do not wait until the tenancy begins.

Prescribed Information

Protecting the deposit is only half the obligation. You must also provide the tenant with prescribed information within 30 days. This includes:

• The name and contact details of the landlord
• The name and contact details of the tenant
• The address of the rented property
• The amount of the deposit
• The name of the scheme used and its contact details
• Information about the scheme's dispute resolution process
• The circumstances under which deductions may be made

Each scheme provides a standard form for prescribed information. Complete it accurately, give a copy to every named tenant, and keep proof that it was provided — ideally a signed acknowledgement.

What Happens If You Do Not Comply?

The penalties for failing to protect a deposit or provide prescribed information are severe.

You cannot serve a Section 21 notice. If the deposit is not protected and prescribed information has not been provided, any Section 21 notice you serve is invalid. This means you cannot use the no-fault eviction process to regain possession of your property. For landlords in Middlesbrough, where possession proceedings can already take months, this is a serious practical problem.

Compensation of 1x to 3x the deposit. A tenant can apply to the county court for compensation of between one and three times the deposit amount if you fail to comply. The court decides the multiplier based on the circumstances, but awards of 2x or 3x are not uncommon where the landlord has shown clear disregard for the rules.

The claim can be made at any time during the tenancy. There is no limitation on when a tenant can bring a claim. Even if the deposit has subsequently been protected, the initial failure to protect within 30 days may still be actionable.

How to Protect a Deposit: Step by Step

Step 1: Receive the Deposit

Receive the deposit from the tenant. Under the Tenant Fees Act 2019, the maximum deposit you can charge is five weeks' rent for tenancies with an annual rent below £50,000, or six weeks' rent for tenancies at or above £50,000. The vast majority of tenancies in Middlesbrough and Teesside fall within the five-week cap.

Step 2: Choose a Scheme

Select one of the three approved schemes. If you use a letting agent, they will typically have a preferred scheme already set up.

Step 3: Register and Protect

Create an account with the chosen scheme (if you do not already have one), register the tenancy details, and either transfer the deposit (custodial) or pay the insurance premium (insured). Complete this within 30 days of receiving the deposit.

Step 4: Provide Prescribed Information

Complete the prescribed information form and provide a copy to every named tenant within 30 days. Keep proof of delivery.

Step 5: Store Your Records

Keep copies of the protection certificate, prescribed information, and any correspondence with the scheme. You will need these at the end of the tenancy and potentially if a dispute arises.

End of Tenancy: Returning the Deposit

At the end of the tenancy, you must return the deposit within 10 days of both parties agreeing on any deductions. If you are making deductions — for damage, unpaid rent, or cleaning — you need evidence to support every claim.

Good evidence includes:

• A detailed check-in inventory with photographs (taken at the start)
• A check-out inventory with photographs (taken at the end)
• Receipts or quotes for repairs or cleaning
• Correspondence with the tenant about any issues during the tenancy

Without proper evidence, you are unlikely to succeed in retaining any part of the deposit, whether through agreement or dispute resolution.

Dispute Resolution

If you and the tenant cannot agree on deductions, all three schemes offer a free alternative dispute resolution (ADR) service. An independent adjudicator reviews the evidence from both parties and makes a binding decision.

The ADR process is straightforward and avoids the cost and delay of court proceedings. However, success depends entirely on the quality of your evidence. Inventories with dated photographs are essential. Without them, adjudicators almost always find in the tenant's favour.

Common Mistakes We See in Teesside

After managing hundreds of tenancies across Middlesbrough, these are the deposit protection mistakes we encounter most frequently:

• Protecting late. Missing the 30-day deadline, even by a few days, leaves you exposed.
• Forgetting prescribed information. Many landlords protect the deposit but neglect to provide the prescribed information — which is equally important.
• Not updating after renewals. If you take a new deposit or the tenancy terms change, you may need to re-serve prescribed information.
• Poor inventories. Protecting the deposit is meaningless if you cannot evidence your deductions at the end. Invest in a proper inventory.
• Letting insured cover lapse. If you use an insured scheme and forget to renew, the deposit becomes unprotected overnight.

Let an Agent Handle It

Deposit protection is straightforward when done correctly, but the consequences of getting it wrong are disproportionately severe. A reputable letting agent handles the entire process as standard — protecting the deposit, serving prescribed information, conducting inventories, and managing end-of-tenancy negotiations.

At Ascot Knight, deposit protection is built into every tenancy we manage in Middlesbrough and across Teesside. We ensure full compliance from day one, so you never have to worry about penalties or invalid notices. Get in touch on 03301 759773 or via WhatsApp to find out how we can protect you and your investment.