The Differences between Insurance and Custodial Deposit Schemes – What you need to know
Protecting your tenant’s deposit with a government-authorised scheme has been a legal requirement since 2007, and now mydeposits delighted to be able to offer two deposit protection options to help you meet your legal obligations.
To coincide with the recent launch of our custodial based scheme on 1 April, we thought it’d be a great opportunity to explain the key aspects and differences of both of our deposit protection scheme options – Insurance and Custodial.
Our insurance scheme explained
By paying a small joining fee and then an individual fee to protect each deposit, our insurance scheme means you can keep hold of the deposit in your bank account for the full duration of the tenancy, accruing any interest during that time.
At the end of the tenancy you can deal directly with your tenant and either hand the deposit back in full straight away, make deductions for things like cleaning or unpaid rent if the tenant has breached the terms of the tenancy agreement.
If the tenant disputes any deposit deductions then you can access a free dispute resolution service to resolve the matter out of courts.
Our insurance scheme has been running since 2007 and we now have over 150,000 landlord and agent members.
Insurance scheme in summary:
You hold the deposit whilst complying with the law
- Pay a small protection fee to legally protect each deposit you take.
- Pass the tenant the Prescribed Information (that details their deposit’s protection) immediately
- You hold the deposit in your account for the length of the tenancy
- Quicker at the end of the tenancy: You are free to return the deposit immediately to your tenant or make any necessary deductions without involving the scheme.
- Ideal for landlords with higher value deposits
- Discounts available for members of NLA, LRS accredited landlords and businesses with client money protection insurance.
Our custodial scheme explained
Our custodial scheme works a little differently and is completely free to join and use. We hold your deposit safely in a secure bank account on the behalf of yourself and your tenant.
At the end of the tenancy you and your tenant contact us to authorise the return of the deposit money and providing you both agree on how the money should be released, we’ll release it quickly to the relevant party. As with the insurance scheme, in the event that you need to make deductions and your tenant doesn’t agree then we offer a free, award-winning dispute resolution service.
If you’d like to know more about our dispute resolution service, take a look at our dispute advice page.
This option is ideal for landlords with smaller deposits who prefer to pass the deposit over to another party for safekeeping.
Custodial scheme in summary:
- No fee for joining or protecting
- mydeposits holds the deposit
- Transfer the deposit to mydeposits by BACS, cheque or Debit Card
- You pass the Prescribed Information to your tenant
- We hold the deposit in secure UK bank accounts for tenancy duration
- Ideal for landlords with lower value deposits
A side-by-side comparison
|Insurance based protection||Custodial based protection|
|You hold the deposit in your bank account||ο|
|We hold the deposit in a secure bank account||ο|
|No fee for protecting||ο|
|Immediate return of the deposit||ο|
|Use of free dispute resolution service||ο||ο|
|Free access to the latest guides and resources||ο||ο|
|Complete online service||ο||ο|
We take care of members, not just deposits
Regardless of the scheme you protect your deposit with, we always provide free dispute resolution service, free access to guides and resources and complete online service.