Can the landlord access custodial deposit funds during the tenancy?

No. A landlord cannot withdraw funds from a custodial scheme during the tenancy. The scheme holds the money until both parties agree a repayment, an adjudicator decides, or a court orders. This is the fundamental difference from insured schemes, where the landlord retains the money.

What if the custodial scheme itself goes insolvent?

Authorised custodial schemes are required by their government authorisation to maintain ring-fenced client accounts separate from their own trading funds. In practice, a scheme insolvency would be managed by the government through the authorisation framework. The statutory protection under Housing Act 2004 means deposit funds are not treated as scheme assets in an insolvency.

Does the landlord earn interest on the custodial deposit?

No. Interest on funds held in custodial schemes accrues to the scheme operator, not the landlord. This is how free custodial schemes (like DPS Custodial) fund their operations without charging landlords. The tenant also does not receive interest — it is a feature of using the scheme.

Custodial Deposit Scheme

By GetRighted Legal Research TeamLast updated July 2026

Summary

When your deposit sits in a custodial scheme, the money leaves your landlord's hands entirely. The scheme operator — DPS, TDS Custodial, or MyDeposits Custodial — holds the funds in a dedicated client account, ring-fenced from both the landlord's assets and the scheme's own funds. The landlord cannot touch the money until the tenancy ends and an agreed repayment is made, or an adjudicator has determined the split. This is the most secure form of deposit protection under Housing Act 2004 s.212. Because the landlord never holds the money, there is no risk of a landlord insolvency stranding your deposit.

How custodial protection works in practice

Within 30 days of receiving the deposit, the landlord (or agent) transfers the deposit funds to the authorised scheme and registers the deposit online. The scheme sends both parties a deposit protection certificate and, as part of the Prescribed Information, details of the scheme and its dispute resolution procedure. The money earns interest held by the scheme — under the DPS model, that interest cross-subsidises the free service. At end of tenancy, both parties use the scheme's online portal to agree or dispute the repayment allocation.

Custodial vs insured — which is safer for tenants?

Custodial schemes are unambiguously safer for tenants. With an insured scheme, the landlord holds the money and buys insurance — if the landlord disappears, the tenant must claim against an insurer. With a custodial scheme, the money is already with the scheme and is returned directly without any insurance claim process. The Housing Act 2004 authorises both models as equally compliant with s.212, but tenants generally have a faster route to their money under the custodial model.

Custodial protection does not prevent a s.214 claim

Even if the deposit is held in a custodial scheme, the landlord can still face a s.214 penalty claim if Prescribed Information was not served within 30 days, or if the deposit was not transferred to the scheme within the 30-day deadline. Protection and Prescribed Information are two separate obligations — both must be met on time.

Confirming your deposit is genuinely custodial

✓Log in to the scheme portal (depositprotection.com, tdscustodial.co.uk, or mydeposits.co.uk) and confirm the scheme type is 'Custodial'.
✓Check that the deposit amount on the certificate matches what you paid.
✓Verify the protection date — it must be within 30 days of when you paid the deposit.
✓Confirm you received the full Prescribed Information package, including the scheme leaflet.
✓If the certificate says 'Insured', the landlord still holds the money — different rules apply.

Returning the deposit from a custodial scheme

At end of tenancy, the landlord or tenant initiates the repayment request through the scheme portal. The party not initiating has a set period (usually 30 days) to agree or dispute. If agreed, the scheme pays out within a few working days. If disputed, the case goes to free adjudication. If the landlord fails to respond within the scheme deadline, the scheme releases the full deposit to the tenant. The court retains jurisdiction to determine deposit disputes independently of the scheme process.

Sources

Housing Act 2004, s.212
Housing (Tenancy Deposits) (Prescribed Information) Order 2007 (SI 2007/797)

Frequently Asked Questions

Can the landlord access custodial deposit funds during the tenancy?: No. A landlord cannot withdraw funds from a custodial scheme during the tenancy. The scheme holds the money until both parties agree a repayment, an adjudicator decides, or a court orders. This is the fundamental difference from insured schemes, where the landlord retains the money.
What if the custodial scheme itself goes insolvent?: Authorised custodial schemes are required by their government authorisation to maintain ring-fenced client accounts separate from their own trading funds. In practice, a scheme insolvency would be managed by the government through the authorisation framework. The statutory protection under Housing Act 2004 means deposit funds are not treated as scheme assets in an insolvency.
Does the landlord earn interest on the custodial deposit?: No. Interest on funds held in custodial schemes accrues to the scheme operator, not the landlord. This is how free custodial schemes (like DPS Custodial) fund their operations without charging landlords. The tenant also does not receive interest — it is a feature of using the scheme.

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