If you take a damage deposit you are required by law to protect the tenant's deposit monies in a government approved deposit protection scheme.
You are obliged to inform the tenant within 14 days of signing the Tenancy Agreement as to which scheme you are using.
Holding deposits, which are taken to secure the tenancy pending the application process, are not part of the damage protection process and do not need to be placed in a scheme.
There are three Damage Deposit Protection Schemes at present:
Landlords can choose between a single custodial scheme, run by an appointed government agency and two insurance based schemes:
You will find more details here: LandlordZONE.co.uk/FAQ
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