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DEPOSIT
HOLDING SERVICE
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Possibly one of the most contentious issues regarding rental property is the
deposit and who holds the money and is there interest payable on the amount
being held and to whom should such interest be paid.
So many landlords look upon the tenants deposit as a good excuse to buy a new
wardrobe or put it towards the next holiday abroad etc.
This can not be done. The deposit is given to a landlord as a bond against
either non payment of rent or to cover the costs of any breakages etc that are
put down to being the tenants fault by an inventory clerk. The money is
still the tenants and can not be considered otherwise. Misuse of a deposit
without the permission of the tenant (make sure it is in writing) can be
construed as not only theft by also gaining monies by deceptive means.
As a landlord, you have a responsibility with regard to holding a deposit for a
tenant.
Our advice is that you agree that yourself or your agent hold
the deposit as stakeholder. This means that no monies can be deducted from
the deposit without the written agreement of both parties. if agreement
can not be reached, then the case goes to a board of arbitrators. I must
admit that I have never known this happen in all the years I have been in
lettings. This is mainly because the arbitrators can decide who should pay
for the costs. For another article on deposits please click here
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Legal update: 16 October 2026
For assured periodic tenancies in England, cash tenancy deposits must be protected in a government-approved scheme, normally within 30 days of receipt, and the prescribed information given. The stakeholder arrangements and deposit holding service described above are historical and should not be treated as an alternative.
Check tenancy deposit protection rules. Update by Simon Burrage.
