Deposits and tenancy agreements

As a landlord, it’s important you know how to handle tenant deposits and tenancy agreements correctly.

Preparing a Tenancy Agreement

If you are renting out a whole property to one or more individuals, you (or your lettings agent if you are using one) will need to prepare a tenancy agreement. The most common type of lettings contract in the UK is the Assured Shorthold Tenancy Agreement. This document outlines the rights and responsibilities of both the landlord and tenant and what is expected from both parties in practical terms.

It is important that any rules or restrictions are explained clearly within the tenancy agreement as this will serve as a contract between you and your tenant. Should any issues arise between you and your tenant, this agreement will be the first document that is referred to and is legally binding.

Though you will provide the new tenant with an initial copy of the proposed agreement, the tenant has the right to question anything that has been included and may choose to negotiate with you. Once both you and your new tenant are happy with the agreement, both parties will then need to each sign a copy of the agreement.

For more information, check out our section on Assured Shorthold Tenancy agreements.

Looking after tenant deposits

Tenant deposits are always collected before the start of the tenancy, with the equivalent of 4-6 weeks’ rent being the most common amount, and have been put in place to protect both you and your tenant in the event of any disputes. Failure to register a deposit can also impact your Section 21 landlord rights.

In England and Wales all deposits must legally be held in one of the Government’s three tenancy deposit protection schemes:

If you’re in Scotland, you will need to hold the deposit in one of the following schemes:

It’s important that you register the deposit on any new tenancy within 30 days of receiving it to ensure that you have fulfilled your legal obligations as a landlord.

You should also print a Tenancy Deposit Protection Certificate and give it to the tenant, as proof that you have entered it into a scheme and so that the tenant knows which scheme is responsible for their deposit.

To be clear, you will need to supply your tenant with the following information regarding their deposit:

  • Details of the scheme that you have chosen to register their deposit with
  • Clarity on when they will get their deposit back at the end of their tenancy
  • Advice on what deductions, if any, may be made from the deposit at the end of the tenancy
  • The process the tenant needs to follow should there be any kind of dispute regarding the deposit and who to speak to
Did you know? Failure to register a tenant’s deposit into one of the recognised schemes could result in you having to pay a fine of up to three times the deposit amount.