Under s213 of the Housing Act 2004 tenants receive protection for the deposits they handed to landlords. Through the Act landlords must be able to provide proof that the tenancy deposit has been protected in one of the three government-approved deposit protection schemes (2 insurance-based and 1 custodial-based).

TENANCY DEPOSIT SCHEME (insurance based)

The TDS is run by the Dispute Service and is built on a voluntary scheme established in 2003 that provides a dispute resolution and complaints handling service for letting agents. In this type of scheme the tenant pays the deposit to the landlord who retains it but pays a premium to an insurer.

The TDS only offers its services to members of regulated bodies which include ARLA, NALS, the NAEA (National Association of Estate Agents) and the RICS. So if any landlord is not a member of one of these organisations then he will not have the deposit protected in this manner. TDS decided to do this because these membership bodies have their own client money protection schemes which will pay out, not only when a tenant makes a claim in the case of landlord default but also in the case of an agent defaulting.

Whilst in most parts of the country the greatest numbers of tenancies are likely to be Assured Shorthold Tenancies, in London it is estimated that as many as 50% may not be. The decision by TDS to offer its services only to members of regulated bodies was based purely on the fact that it’s insurers were not willing to insure against the risk of deposits not being available in the event of a claim should an agent or landlord default.


The TDSL is a partnership between the NLA and Hamilton Fraser Insurance (who are authorised and regulated by the FSA) and which trades as This protection scheme continues to offer its services to those who are not members of regulated bodies.


The only custodial scheme is run by the DPS (Deposit Protection Service) and open to all landlords and letting agents. The only difference between the DPS custodial scheme and the insurance-based schemes is that the landlord pays the deposit directly into the scheme within 14 days of receiving it, rather than paying a premium to an insurer. The tenant will receive a certificate of registration stating which scheme the money is held with, along with the name, address, telephone number, email address and any fax number of the scheme administrator.

In the case of dispute the DPS adjudication service is provided by the Chartered Institute of Arbitrators (CIArb), through their IDRS dispute resolution service and funded by the accrued interest on the tenancy deposits. This means that there are no fees for landlords or letting agents. Both landlord and tenant have to agree to use the scheme because the adjudicators decision is final but the scheme can step in where the contact details of either party are unknown or where one party will not co-operate with the other. This is known as a ‘single claim process’. A decision should be made within 28 days, and the DPS will then take responsibility for repaying the deposit according to the decision.

If the landlord refuses to lodge the disputed deposit with the scheme, then the tenant can’t use the free ADR scheme, and will have to go to court to get an order. However, the scheme guarantees to pay the amount in the court order, and will take responsibility for recovering this amount from the landlord. This is the advantage over simply going to court – the scheme will ensure compliance with any court order.

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