Tenancy Deposit Protection: What Every Landlord Must Do After May 2026

Why Deposit Protection Matters More Now

Before 1 May 2026, a landlord who failed to protect a deposit faced two consequences: a financial penalty of between one and three times the deposit amount under Section 214 of the Housing Act 2004, and the inability to serve a valid Section 21 notice.

Section 21 no longer exists. The Renters' Rights Act 2025 abolished it from 1 May 2026, and every private residential tenancy in England is now a periodic assured tenancy. The only route to possession is Section 8 of the Housing Act 1988, which requires the landlord to prove a specific statutory ground.

Section 26 of the Renters' Rights Act amends Section 215 of the Housing Act 2004. Under the amended provision, a court cannot make an order for possession under most Section 8 grounds unless the deposit is being held in accordance with an authorised scheme and the landlord has complied with the scheme's requirements on receiving the deposit. The only exceptions are Ground 7A (serious anti-social behaviour involving a criminal conviction) and Ground 14 (anti-social behaviour). (Source: Renters' Rights Act 2025, s.26; The Independent Landlord, Section 8 grounds analysis, May 2026.)

For every other ground, including Ground 8 (rent arrears), Ground 1 (landlord or family occupation), and Ground 1A (intent to sell), an unprotected deposit blocks the possession claim entirely. The deposit must be protected before the Section 8 notice is served. Correcting the position at the same time as serving the notice is not sufficient.

In practical terms, a landlord with an unprotected deposit who needs to recover the property for a legitimate reason, whether to sell, to move in, or because the tenant owes months of rent, cannot obtain a court order until the deposit compliance position is resolved. Early Section 8 cases since May 2026 have already seen claims fail on deposit compliance grounds before the merits of the possession ground were even considered. (Source: Neon Property Services, Section 8 early case analysis, May 2026.)

The Two Obligations: Protection and Prescribed Information

Deposit compliance involves two distinct legal obligations under Section 213 of the Housing Act 2004. Landlords frequently treat them as one. They are not.

Obligation 1: Protect the deposit. The landlord must place the deposit in one of the three government-approved tenancy deposit schemes within 30 calendar days of receiving it. The 30 days begin from the date the deposit is received, not the date the tenancy starts. (Source: Housing Act 2004, s.213(3), as amended by s.184 Localism Act 2011.)

Obligation 2: Serve the prescribed information. Within the same 30-day window, the landlord must provide the tenant, and any person who paid the deposit on the tenant's behalf, with a specific set of information prescribed by The Housing (Tenancy Deposits) (Prescribed Information) Order 2007. This includes the name and contact details of the scheme, the procedures for getting the deposit back at the end of the tenancy, how disputes are resolved, the circumstances under which the deposit may be retained, and a signed certificate from the landlord confirming the information is accurate. The tenant must be given the opportunity to sign the document. (Source: SI 2007/797, art.2; Shelter Legal England.)

Protecting the deposit but failing to serve the prescribed information still leaves the landlord exposed. The penalty under Section 214 applies to failures in either obligation. On the possession side, there is a degree of legal uncertainty. Some legal commentators have interpreted the amended Section 215 as requiring only that the deposit is protected in an authorised scheme for possession purposes. Others have read the amended wording as also requiring compliance with prescribed information requirements. Given this uncertainty, landlords are strongly advised to comply with both obligations in full. Doing so removes any possible argument a tenant could raise to block a future possession claim.

The Three Government-Approved Schemes

There are three authorised tenancy deposit protection schemes in England:

Deposit Protection Service (DPS) operates as a custodial scheme. The landlord transfers the deposit to the DPS, which holds it for the duration of the tenancy. There is no charge to landlords or tenants for the custodial service. At the end of the tenancy, both parties agree how the deposit should be split, and the DPS releases the funds accordingly. If there is a dispute, the DPS holds the deposit until it is resolved through the scheme's alternative dispute resolution process or by the courts.

Tenancy Deposit Scheme (TDS) offers both a custodial option and an insured option. Under the insured model, the landlord holds the deposit in their own account and pays an annual membership fee to TDS. The scheme guarantees that the tenant will receive the amount they are owed at the end of the tenancy, even if the landlord fails to return it. The custodial option works the same way as DPS.

MyDeposits also operates both custodial and insured models. The insured scheme involves an annual membership. MyDeposits took over the deposits previously held by Capita TDP when that scheme closed to new deposits.

For most self-managing landlords with a small portfolio, a custodial scheme is the simplest option. There is no cost, no annual renewal to remember, and the deposit is held independently, which eliminates the risk of accidentally spending it or commingling it with rent. For landlords who prefer to retain control of the deposit funds, an insured scheme offers that flexibility, but requires ongoing membership and careful record-keeping.

Whichever scheme a landlord uses, the obligation to serve prescribed information is separate. The scheme's deposit protection certificate alone does not satisfy the prescribed information requirement.

The Deposit Cap

The Tenant Fees Act 2019 caps the amount a landlord can require as a tenancy deposit. For tenancies where the total annual rent is less than £50,000, the cap is five weeks' rent. Where the annual rent is £50,000 or more, the cap is six weeks' rent. (Source: Tenant Fees Act 2019, s.3; GOV.UK Tenant Fees Act guidance.)

To calculate five weeks' rent, multiply the monthly rent by 12, then divide by 52 to get one week's rent, then multiply by five.

A landlord who holds a deposit that exceeds the cap is holding a prohibited payment under the Tenant Fees Act. The excess must be returned to the tenant. Taking a deposit above the cap is a civil offence with a financial penalty of up to £5,000 for a first breach and up to £30,000 for a subsequent breach. Where an existing deposit was taken before the cap came into force and the tenancy has since renewed, the cap applies from the renewal date. If the deposit amount exceeds the new cap on renewal, the landlord must return the surplus.

The cap applies to the deposit itself. Pet insurance costs cannot be added to the deposit to circumvent it. There is no special exemption for tenancies where a pet is permitted. (Source: GOV.UK Tenant Fees Act guidance.)

What Happens If You Get It Wrong

The consequences of deposit non-compliance operate on two separate tracks.

Track 1: Financial penalty. Under Section 214 of the Housing Act 2004, a tenant (or the person who paid the deposit) can apply to the county court for an order requiring the landlord to pay a penalty of between one and three times the deposit amount. This is not a fixed sum. Courts have discretion over the multiplier. Minor breaches, such as protecting the deposit a few days outside the 30-day window, have generally attracted penalties at the lower end. Complete non-protection or persistent failure to serve prescribed information tends to attract higher penalties. (Source: Housing Act 2004, s.214(4); Dean Wilson LLP, April 2025.) A tenant has six years from the date of the breach to bring a claim. This means a landlord who failed to protect a deposit years ago may still face a penalty claim today.

Track 2: Possession blocked. Under Section 215 of the Housing Act 2004, as amended by Section 26 of the Renters' Rights Act, a court cannot make a possession order under any Section 8 ground (except Grounds 7A and 14) unless the deposit is properly protected. This applies regardless of when the tenancy started. The landlord can rectify the position by protecting the deposit (even late) and complying with the scheme's requirements before serving the Section 8 notice. However, late protection does not eliminate the risk of a Section 214 penalty claim. A tenant facing eviction proceedings may bring a counterclaim for deposit penalties, and if the penalty amount reduces the rent arrears below the threshold required for Ground 8, the possession claim may fail. (Source: Talbots Law, March 2026; Pinsent Masons, May 2026.)

The practical effect is straightforward. A landlord who has not protected the deposit cannot evict the tenant for rent arrears, cannot recover the property to sell it, and cannot move back in, until the deposit position is resolved. Even then, the financial penalty exposure remains.

Common Mistakes and Edge Cases

Protecting but not serving prescribed information. This is the single most common deposit compliance failure. Many landlords believe that registering the deposit with a scheme is sufficient. It is not. The prescribed information is a separate obligation with a separate 30-day deadline. The deposit scheme does not send prescribed information on the landlord's behalf. The landlord must do this, and must retain evidence of service.

Relying on the letting agent. Where a landlord instructs a letting agent to manage the deposit, the legal obligation remains with the landlord. If the agent fails to protect the deposit or serve prescribed information within 30 days, the landlord is liable. Landlords should verify protection independently by checking the scheme's online portal.

Change of landlord. When a property is sold with a sitting tenant, the incoming landlord "receives" the deposit at the point of transfer. Section 215B of the Housing Act 2004, inserted by the Deregulation Act 2015, provides a carryover where the deposit was properly protected and prescribed information served under the original tenancy. However, if the original landlord did not comply, the new landlord inherits the compliance gap and must rectify it. (Source: Osbornes Law, March 2026; Deregulation Act 2015, s.32.)

Statutory periodic rollover. When a fixed-term tenancy became a statutory periodic tenancy (now an assured periodic tenancy under the Renters' Rights Act), the deposit protection carries over without needing to be re-registered, provided the deposit amount has not changed and the tenancy terms remain the same. However, if the deposit amount changes (for example, on a tenancy renewal at a higher rent), the landlord must update the scheme and may need to re-serve prescribed information. (Source: TDS scheme guidance; Shelter Legal England.)

Excess deposits from before the cap. If a landlord took a deposit before the Tenant Fees Act cap came into force and the tenancy has since rolled over or renewed, the cap now applies. Any amount above the cap is a prohibited payment and must be returned.

LLCR tracks deposit protection deadlines alongside gas safety, EICR, EPC, and every other compliance obligation in one place. If you manage your own properties, the compliance checker gives you a certificate-by-certificate breakdown in under two minutes.