Can a landlord switch between custodial and insured schemes during a tenancy?

A landlord can transfer a deposit from one authorised scheme to another, but must provide updated prescribed information each time. Failing to provide updated prescribed information triggers a fresh s.213 obligation and potentially a s.214 penalty claim for the tenant. Any switch must be done within 30 days of the transfer and the tenant must be notified. Tenants should check their prescribed information whenever the scheme changes.

If the landlord fails to repay my deposit in an insured scheme, what happens?

The tenant should first make written demand for repayment. If unpaid after a reasonable period (typically 10 days), the tenant should contact the insured scheme directly and invoke the ADR process. The scheme will pay out from its insurance fund and then recover from the landlord. In parallel, the tenant can apply to the county court for the s.214 penalty (1–3× deposit) and repayment. Court and ADR are not mutually exclusive — you can pursue ADR for the deposit and court for the penalty.

Which scheme should a tenant prefer?

Tenants have no legal right to insist on a particular scheme type — the choice is the landlord's. However, you can ask your landlord or letting agent which scheme they use and request custodial if you are concerned about the landlord's financial stability. Some letting agents operate their own client accounts linked to insured schemes; if the agent ceases trading, this can create complications with insured deposits that do not arise with custodial schemes.

Does the scheme type affect the 1–3× penalty for non-protection?

No. The Housing Act 2004 s.214 penalty is calculated on the deposit amount and the circumstances of the breach (timing, repetition, landlord's conduct) — not on which scheme type was or was not used. The court has discretion to award between 1× and 3× the deposit. Late protection (e.g., protected on day 35 instead of day 30) can attract the penalty even if the deposit is eventually protected in either scheme type.

Custodial vs Insured Deposit Scheme

By GetRighted Legal Research TeamLast updated July 2026

Summary

A custodial deposit scheme (DPS Free Custodial, MyDeposits Custodial) holds the tenant's deposit in an independent protected account — neither the tenant nor the landlord can access it without agreement or an adjudicator's award. An insured scheme (MyDeposits Insured, TDS Insured) lets the landlord hold the deposit cash and pays insurance to cover the scheme's liability if the landlord absconds. Verdict: from the tenant's perspective, custodial schemes are safer — the money is ringfenced and cannot be misappropriated. Insured schemes are administratively convenient for landlords but leave tenants exposed if the landlord spends the deposit before repaying it.

Custodial vs Insured — Key Differences

How each scheme type works in practice:

Statutory Requirements — Same for Both
Housing Act 2004, s.213: a landlord must protect a deposit in an authorised scheme within 30 days of receiving it. Housing Act 2004, s.213(5): the landlord must provide 'prescribed information' to the tenant within 30 days. Both custodial and insured schemes satisfy the s.213 requirement. Housing Act 2004, s.214: failure to protect or provide prescribed information entitles the tenant to claim 1–3× the deposit amount as a penalty. The statutory penalty is the same regardless of scheme type — protection in the wrong scheme or late protection triggers the same sanction.

The Dispute Process: How They Differ

In a custodial scheme, when a tenancy ends the landlord and tenant both submit claims to the scheme. The scheme releases the undisputed portion immediately and refers the disputed amount to adjudication. Because the money is held by the scheme, the decision is implemented automatically — the tenant receives their award without having to chase the landlord. In an insured scheme, the landlord holds the money. When the tenancy ends, the landlord must repay the undisputed amount and refer any dispute to the insured scheme. If the landlord fails to repay the undisputed portion or refuses to cooperate, the tenant must first demand repayment, then involve the scheme — which then pays from the insurance fund and pursues the landlord. This adds time and friction to the process.

Scheme Scale and Adjudication Outcomes

The Deposit Protection Service (DPS) is the largest custodial scheme, protecting approximately 1.6 million deposits. TDS and MyDeposits operate both custodial and insured schemes. Across all government-authorised schemes, approximately 1–3% of deposits end up in formal adjudication. Of disputed adjudications, landlords recover all of their claimed deductions in roughly 25–30% of cases; tenants recover all of their deposit in approximately 30–35% of cases; partial awards are most common. The scheme type (custodial vs insured) does not affect adjudication outcomes — the same adjudication principles apply to both.

What Tenants Should Do Regardless of Scheme Type

Whether the scheme is custodial or insured, always: (1) obtain written confirmation of the scheme name and reference number within 30 days of paying your deposit; (2) check the prescribed information certificate names the correct scheme and reference; (3) photograph the property's condition at check-in and check-out against a detailed inventory; (4) request the scheme's ADR process immediately if the landlord does not repay within 10 days of the tenancy ending. The 6-year limitation period for s.214 claims (Limitation Act 1980, s.5) means you can claim the penalty even after the tenancy has ended if protection was not provided.

Sources

Housing Act 2004, ss.213–215
Housing (Tenancy Deposits) (Prescribed Information) Order 2007
Limitation Act 1980, s.5
Deposit Protection Service transparency data 2023

Frequently Asked Questions

Can a landlord switch between custodial and insured schemes during a tenancy?: A landlord can transfer a deposit from one authorised scheme to another, but must provide updated prescribed information each time. Failing to provide updated prescribed information triggers a fresh s.213 obligation and potentially a s.214 penalty claim for the tenant. Any switch must be done within 30 days of the transfer and the tenant must be notified. Tenants should check their prescribed information whenever the scheme changes.
If the landlord fails to repay my deposit in an insured scheme, what happens?: The tenant should first make written demand for repayment. If unpaid after a reasonable period (typically 10 days), the tenant should contact the insured scheme directly and invoke the ADR process. The scheme will pay out from its insurance fund and then recover from the landlord. In parallel, the tenant can apply to the county court for the s.214 penalty (1–3× deposit) and repayment. Court and ADR are not mutually exclusive — you can pursue ADR for the deposit and court for the penalty.
Which scheme should a tenant prefer?: Tenants have no legal right to insist on a particular scheme type — the choice is the landlord's. However, you can ask your landlord or letting agent which scheme they use and request custodial if you are concerned about the landlord's financial stability. Some letting agents operate their own client accounts linked to insured schemes; if the agent ceases trading, this can create complications with insured deposits that do not arise with custodial schemes.
Does the scheme type affect the 1–3× penalty for non-protection?: No. The Housing Act 2004 s.214 penalty is calculated on the deposit amount and the circumstances of the breach (timing, repetition, landlord's conduct) — not on which scheme type was or was not used. The court has discretion to award between 1× and 3× the deposit. Late protection (e.g., protected on day 35 instead of day 30) can attract the penalty even if the deposit is eventually protected in either scheme type.

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Custodial vs Insured Deposit Scheme

The Dispute Process: How They Differ

Sources

Frequently Asked Questions

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