An HMO Landlord’s Guide to Deposit Protection Schemes

Did you know that if you are an HMO landlord in Liverpool who is running an assured shorthold tenancy, you must register the tenants’ deposits in one of the government-backed protection schemes? 

Three of these schemes exist, each one offering different options for custodial and insurance registration.  

HMO landlords need to be aware that there are significant consequences if they fail to properly handle their tenants’ deposits. A tenant can claim as much as three times their deposit’s value in damages if their deposit has not been properly registered in one of the schemes. Not only that but any Section 21  notice that is issued to them may also be invalidated.  

Understanding deposit protection schemes is essential, for HMO landlords in Liverpool and the team at Portus Lets Ltd want to ensure you are informed, so we have put together this guide to help you. 


What Are Deposit Protection Schemes? 

Government-approved deposit protection schemes protect the deposit paid by the tenant to the landlord until their tenancy comes to an end. 

At that time, if the tenant paid their bills and rent in full and didn’t create any significant damage, their deposit is returned to them.  

There are three deposit protection schemes that are approved  by the government:  

  • My Deposits
  • Tenancy Deposit Scheme
  • Deposit Protection Service


Custodial Schemes and Insurance Schemes  

All three of the available protection schemes have insurance and custodial options.  

Custodial schemes protect the tenant’s deposit free of charge, with the funds held in their account.  

An insured scheme, meanwhile, charges landlords a fee, but the funds are held in the landlord’s own account so they can gain interest. HMO landlords often choose this option as they can accumulate significant interest.  


What Rules Are in Place for Managing Deposits? 

A landlord is required to register the tenant’s deposit within a 30-day period of its receipt.  

If a property has an annual rate below £50,000 landlords can charge a  maximum deposit of 5 weeks’ rent. 6 weeks’ rent can be charged on properties with annual rates over this amount.  

Landlords must also supply the following: 

  • The address of the property  
  • The amount of the deposit and the protection scheme they have chosen
  • The deposit protection scheme agency and their alternative dispute  resolution department’s contact details 
  • The landlord’s own contact details 
  • The reasons for holding a deposit 
  • Instructions regarding applying for the refund of the deposit and how to  handle a deposit dispute 


What Happens When Landlords Fail to Register Their Tenant’s Deposit?  

  • A tenant can report a landlord who fails to register their deposit to the local county court.  
  • Typically, the landlord will then be required to repay their tenant’s deposit or put it into a custodial deposit scheme within a period of 14 days.  
  • Landlords may even receive a court order demanding they pay the tenant up to three times the amount of their original deposit.  
  • Landlords are also at risk of the court deciding the tenants are not required to vacate the property when their tenancy ends.  


Is There an Alternative to a Tenancy Deposit Scheme?  

A deposit replacement scheme is the alternative to the deposit protection scheme. This scheme allows the tenant to pay a non-refundable, smaller fee to the insurance provider before their tenancy begins. Tenants have greater financial flexibility with this option since the moving-in upfront costs are reduced.  

As experts in HMO property management, the team at Portus Lets Ltd can offer advice and guidance to HMO landlords in Liverpool regarding deposit protection schemes. Get in touch with us today on 0151 329 3538 or email us at to learn more.

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