MyDeposits: Understanding Automatic Unprotection for Some Deposits

MyDeposits announced an update in their policy regarding the automatic unprotection of some deposits, particularly for tenancies that turn statutory periodic from the winter of 2013/2014. Landlords and letting agents must take specific actions within a given time frame to avoid this automatic unprotection.

From the MyDeposits website:

You will have 30 calendar days from the end of the fixed-term tenancy agreement to update the status of the protection with MyDeposits; otherwise, we will automatically unprotect the deposit.

One of the reasons given by the scheme for this change is as follows:

Since we launched in 2007, many deposits protected with the scheme have not been unprotected at the end of the tenancy. This confuses our Members and their tenants, particularly when dispute resolution is required.

The main issue is that, at the end of tenancies, landlords and agents are repaying deposits without issues and not going online to unprotect the deposit using their MyDeposits login. Consequently, numerous deposits are still protected, even though the tenancy has ended.

To address this, landlords and letting agents will receive four email notifications before the fixed term ends (as provided when the deposit was first protected).

Within 30 days of the fixed-term tenancy agreement ending, landlords and agents are required to either extend the deposit protection into a statutory periodic tenancy, end the deposit because the tenant has vacated at the end of the term, or end the deposit and re-protect if a new tenancy has been issued.

There is no fee for extending the deposit protection. However, a new protection fee is payable if a renewal assured shorthold tenancy is processed. The deposit will become unprotected if the landlord or agent does nothing within the 30-day window.

It is essential to clarify whether the deposit is immediately unprotected after 30 days of inaction or sometimes after any notice. Presumably, such notice is required by paragraph 5(3B) Schedule 10 Housing Act 2004, which must give information about the determination to cease retaining the deposit under the scheme and the date the deposit ceases to be retained. According to the schedule, that date must not be within three months from receipt by the landlord of the notice [paragraph 5A(7) Schedule 10].

Once the deposit is extended, it will remain protected indefinitely. Considering that most tenants stay after the initial fixed term (except for most student lets), it is unclear how this will help the problem of landlords and agents not unprotecting deposits at the end. Since the deposit will now roll on indefinitely, the position is no different from before, as the deposit remains protected forever until the scheme is notified through the MyDeposits login.

To provide a better understanding of this policy, landlords and letting agents should refer to the deposit checker feature and store any personal data related to deposit protection for future reference.