Handling deposits correctly is one of the most important compliance duties in the UK lettings sector. It is also one of the fastest ways for a letting agent to damage trust, trigger complaints, or expose landlords to legal action if done incorrectly.
Deposits are not “admin details” to tidy up later. They are a legally protected sum of money held on behalf of a tenant, with strict deadlines and clear documentation requirements. In practice, many issues arise not because people are deliberately trying to cut corners, but because processes are inconsistent, responsibilities are unclear, or staff assume another team member has already completed the required steps.
This is why deposit compliance needs to sit at the core of letting agents rules and regulations, not as an afterthought or an admin task to be completed once the tenancy has already moved forward.
What deposit protection actually means (and why it matters)
In England and Wales, if a tenant pays a deposit for an Assured Shorthold Tenancy (AST) beginning after 6 April 2007, the deposit must be protected in a Government-approved tenancy deposit protection (TDP) scheme.
There are three approved schemes:
● Deposit Protection Service (DPS)
● MyDeposits
● Tenancy Deposit Scheme (TDS)
The purpose of these schemes is to:
● prevent deposits being unfairly withheld
● provide a structured dispute process
● enforce clear obligations on landlords and agents
When deposit rules aren’t followed, tenants can claim compensation, and landlords can lose the right to serve a valid Section 21 notice in many cases.
The core legal duties letting agents must follow
Deposit compliance usually has two separate tasks, both of which must be completed properly:
1) Protect the deposit within the deadline
In England and Wales, deposits must be protected within 30 calendar days of receiving the deposit.
It’s important to note this refers to receiving the money (not the tenancy start date). If the deposit is paid earlier, your compliance deadline starts earlier too.
2) Provide the tenant with Prescribed Information
Letting agents must ensure the tenant receives the Prescribed Information within the same 30-day period.
This information typically includes:
● the scheme name and contact details
● the deposit amount
● the property address
● the landlord’s details
● what the deposit covers
● dispute resolution process
● how the deposit can be returned
● circumstances where deductions may apply
This is not optional paperwork. If it’s incomplete, inaccurate, missing signatures, or served outside the deadline, it can be treated as non-compliance.
The most common failures (and why they happen)
Even experienced agencies can slip up. Below are the most common failures and the operational reasons behind them.
1) Protecting the deposit late
This tends to happen when:
● deposits are received outside the normal workflow (e.g., bank transfer to branch account)
● multiple staff handle the tenancy progression
● the “deposit received” date is not recorded correctly
● tenancy start dates change, confusing internal deadlines
Best practice: use a simple compliance tracker that records:
● date deposit received
● protection date
● date Prescribed Information served
● confirmation evidence
2) Serving Prescribed Information incorrectly
This is a bigger issue than many agents assume.
Common mistakes include:
● giving scheme leaflets but not the correct Prescribed Information
● missing landlord’s address or contact details
● failing to include all tenants (for joint tenancies)
● not obtaining required signatures (where applicable)
● giving documents to one tenant only and assuming it covers all parties
If the tenancy becomes a dispute later, you need proof that the information was actually served correctly.
Best practice: send Prescribed Information via email with audit trail, and store PDF copies of what was sent and when.
3) Protecting the wrong deposit amount
This can happen if:
● the holding deposit is treated incorrectly
● the tenant pays deposits in instalments
● fees or rent are mixed into a deposit payment
● systems auto-fill deposit amounts based on advertised rent
If the deposit amount recorded in the scheme does not match what was actually paid, you have a gap in compliance.
Best practice: verify deposit total from bank transaction confirmation before submission, not from the tenancy agreement draft.
4) Not updating deposit protection when tenancy renews or changes
Renewals, statutory periodic tenancies, rent increases, and tenant swaps create confusion.
Common problems:
● deposit remains in the old tenant’s name when someone changes
● tenants are removed/added but scheme record is not updated
● deposit top-ups are taken without updating scheme details
This can lead to disputes where the scheme records do not match the real occupiers or deposit level.
Best practice: treat any tenancy change as a trigger for a deposit compliance review.
5) Mishandling deposit deductions at the end of tenancy
This often creates reputational damage even if the scheme protection was done correctly.
Examples include:
● deductions claimed with no evidence
● cleaning charges without checkout inventory proof
● vague “damages” without dated photographs
● charging for fair wear and tear
Even where deductions are reasonable, poor documentation makes it easy for a tenant to win a dispute.
Best practice: ensure the check-in/check-out process is robust and consistent. A strong inventory and photo evidence set reduces disputes massively.
Who is responsible: landlord or letting agent?
Legally, responsibility sits with the landlord, but in reality the letting agent often manages the entire process and can create the compliance risk.
This becomes a major issue when:
● the landlord assumes the agent did it
● the agent assumes the landlord did it (especially on “tenant find” only agreements)
● responsibilities are not documented clearly in terms of business
If compliance fails, the landlord can still face penalties, and the agency can face complaints, contract disputes, and reputational fallout.
Best practice: state clearly in your agency agreement:
● who registers protection
● who serves Prescribed Information
● what evidence will be stored and supplied
Operational fixes: how agencies can stay compliant every time
Deposit rules do not need to create stress, but they do require a consistent workflow. A few simple controls can remove the majority of risk:
Create a “deposit compliance checklist” for every tenancy
Include:
● deposit received date
● scheme registration completed date
● Prescribed Information served date
● evidence uploaded to tenancy file
● landlord notified (optional but recommended)
Use automation for reminders
Many compliance failures happen because staff are busy, not because they are careless.
Automate:
● a 10-day reminder if deposit not protected
● a 25-day escalation warning
● a 30-day red alert
Make it part of tenancy progression (not a separate admin task)
Deposit protection should be a mandatory stage gate before move-in confirmation is issued.
What happens if deposit protection rules aren’t followed?
Non-compliance can result in:
● tenant compensation claims (often 1–3 times the deposit)
● restriction on serving valid Section 21 notices
● formal complaints and redress scheme involvement
● loss of landlord trust and contract terminations
Even worse, a deposit failure tends to be very “black and white”. There’s little room to argue if the deadline was missed or the Prescribed Information wasn’t correct.
Final thoughts
Deposit protection compliance isn’t only about avoiding penalties. It’s about professionalism, trust, and proving you run a clean operation. Tenants are far more aware of their rights than they were five or ten years ago, and many disputes begin with a single question: “Was my deposit protected properly?”
For letting agents, the safest approach is also the simplest one: treat every deposit like a regulated process, document it properly, and make proof easy to retrieve. If you can do that consistently, you protect your landlords, support your tenants, and reduce operational risk across your entire portfolio.