Thousands of tenants in England and Wales will be better off by just under £5m when their protected tenancies come to an end, according to the Deposit Protection Service (DPS). This is thanks to the interest accrued.

Since 6 April 2007, every deposit-taking landlord and letting agent in England has to use one of two tenancy deposit protection methods, a custodial or insurance-based scheme, for any new or updated assured shorthold tenancy (AST).

The DPS works by holding a tenant’s deposit, free of charge, for the term of the tenancy agreement. At the end of the rental period, the deposit, and a portion of the interest it has accumulated, is paid back to whoever is entitled to it – tenant or landlord, depending on the condition of the property and the terms of the rental agreement. The remaining interest is used to fund the service.
“Prior to the new legislation, it was very rare for tenants to receive any interest on their deposits”, said Kevin Firth, client services sirector for The DPS. “Many landlords and tenants were left out of pocket by either rogue landlords failing to return deposits or rogue tenants disappearing leaving unpaid rent. The DPS guarantees to return the deposit to the person entitled to it, which is a win-win for everybody in the rental sector.”