Unprotected deposits: penalties and how to fix it

Why it matters

This is the most expensive routine mistake in residential letting, and it is entirely avoidable. It also blocks certain possession routes while the breach continues.

Legal requirements

• Protection and prescribed information are both required within thirty days of receipt.
• Compensation ranges from one to three times the deposit at the court's discretion.
• A separate award can arise for each tenancy where the failure was repeated.
• Returning the deposit late does not remove the right to claim compensation.

Common mistakes

• Protecting the deposit but never serving the prescribed information.
• Failing to reissue prescribed information after a change of landlord or scheme.
• Treating a holding deposit converted to a tenancy deposit as if the clock started later.
• Assuming a deposit paid by a parent does not need prescribed information served on them.

Practical guidance

• Protect on the day the money arrives and serve the prescribed information the same week.
• Keep the scheme certificate and a dated proof of service in the tenancy file.
• Audit older tenancies now and correct any gap before it becomes a claim.
• Reissue prescribed information whenever the landlord, agent or scheme changes.

Fixing a historic failure

If you find an unprotected deposit, protect it immediately and serve the prescribed information. That does not extinguish an existing claim but it stops the breach continuing and courts take remedial action into account when setting the multiplier. In some situations returning the deposit in full is the cleaner commercial answer, particularly where the tenancy is ending and the deductions you had in mind are modest. Take advice before deciding, because the choice affects any possession plan too.

Prescribed information in practice

The prescribed information includes the scheme details, the deposit amount, the property address, the landlord and tenant contact details, the circumstances in which deductions may be made and details of anyone who paid the deposit on the tenant's behalf. Serve it as a signed document, keep a copy and record how and when it was delivered. Many claims succeed not because the deposit was unprotected but because the landlord cannot prove the information was ever given.