Government pledges deposit schemes will deliver good value for landlords and tenants

The UK government has confirmed that its current contract with the Tenancy Deposit Scheme (TDS) will conclude in 2028, while reaffirming its commitment to ensuring tenancy deposit protection schemes continue to offer good value for both landlords and tenants. This announcement is significant for landlords, letting agents, and property professionals as it signals ongoing government oversight and procurement processes aimed at maintaining transparency, performance, and cost-effectiveness in deposit protection services.

Government’s approach to tenancy deposit schemes and contract renewal

Tenancy deposit schemes in England and Wales are not government-owned but operate under government approval to protect tenants’ deposits and provide dispute resolution services. The current contract with the Tenancy Deposit Scheme, one of the government-approved providers, is set to expire in March 2028. The government has indicated that the scheme itself will continue beyond this date, and the existing provider may bid to retain the contract.

Landlords remain legally required to place tenant deposits in a government-approved tenancy deposit scheme. This legal obligation ensures that tenants’ deposits are safeguarded and that landlords comply with statutory requirements, which is crucial for possession proceedings and dispute resolution under the Renters’ Rights Act and related legislation.

Ensuring value and transparency in deposit protection services

In response to parliamentary scrutiny, the government has emphasised its commitment to securing good value for money and transparency in tenancy deposit schemes. Housing Minister Matthew Pennycook highlighted that recent contract extensions have introduced improvements such as enhanced financial transparency, more rigorous Key Performance Indicators (KPIs), and the establishment of a Social Value fund designed to benefit tenants and landlords alike.

Ongoing monitoring of suppliers’ financial performance and contractual compliance is intended to ensure that deposit schemes deliver effective services. The government’s procurement process for the next contract will prioritise value for landlords and tenants, alongside maintaining transparency in revenue and cost data. This approach aims to uphold confidence in the deposit protection system and support fair outcomes in tenancy disputes.

Tenancy Deposit Scheme’s intentions for the upcoming contract

Steve Harriott, Group Chief Executive of The Dispute Service (TDS), has confirmed that TDS plans to bid for the new contract when it is procured later this year. TDS has been operating tenancy deposit schemes in England and Wales since 2003 and has been government-authorised since 2007. The organisation anticipates a smooth transition to the new contract arrangements from 1 April 2028, aiming to continue providing effective deposit protection and impartial dispute resolution services.

TDS’s longstanding experience as the largest provider of tenancy deposit services in the UK positions it as a key player in the forthcoming procurement. Their bid will likely focus on building upon their track record of service improvements and compliance with government requirements.

Legal requirements for landlords regarding deposit protection

Under the Renters’ Rights Act and related legislation, landlords must protect tenant deposits in a government-approved scheme and comply with the scheme’s requirements at the outset of the tenancy. Failure to do so may impact the landlord’s ability to rely on certain possession grounds in court. The Act also allows courts to award possession where deposits have been properly protected or returned, including any agreed deductions.

Landlords should note that the Act does not alter what constitutes a valid deduction from a deposit, which typically includes unpaid rent or utility bills. Courts may also consider evidence from specific court processes that determine whether deposits were appropriately protected. This legal framework underscores the importance of landlords adhering to deposit protection rules to safeguard their possession rights and avoid potential disputes.

What this means for landlords

Landlords should be aware that the government’s commitment to re-procuring tenancy deposit schemes with a focus on value and transparency may lead to changes in service providers or contract terms from 2028 onwards. It is important for landlords and letting agents to stay informed about the outcomes of the procurement process and any updates to deposit protection requirements.

Compliance with deposit protection rules remains essential to protect landlords’ legal rights and minimise the risk of disputes. Landlords should ensure deposits are placed promptly in government-approved schemes and that all statutory information is provided to tenants within the required timescales. Understanding the implications of the Renters’ Rights Act on deposit handling and possession proceedings will also be increasingly important.

What TLA members should consider

• Regularly verify that tenant deposits are protected in a government-approved scheme and that all related legal requirements are met.
• Monitor communications from tenancy deposit schemes and government updates regarding contract changes or new service arrangements.
• Prepare for potential changes in deposit protection providers or contract terms from April 2028 by reviewing current processes and contracts.
• Ensure tenancy agreements and deposit handling procedures reflect compliance with the Renters’ Rights Act and other relevant legislation.
• Utilise TLA resources and training to stay informed about deposit protection obligations and dispute resolution options.
• Consider seeking professional advice if uncertain about deposit protection compliance or possession proceedings related to deposit issues.

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TLA update

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