Here is a question to the blog clinic from Chris who is a landlord
As a resident landlord, does any deposit given by tenant have to be lodged with Tenancy Deposit Scheme, please?
No. The tenancy deposit scheme only applies to assured shorthold tenancies.
If you are a resident landlord, ie if you live in the same building as your tenant, then this (save as set out below) cannot be an assured shorthold tenancy as resident landlords are excluded by the Housing Act 1988 which set up the statutory code which created assured and assured shorthold tenancies.
So if you are renting out a granny annexe or a garden flat in your home, or if you have converted your house to flats and live in one of them and rent out the others – these will not be assured shorthold tenancies and you will not be obliged to protect your tenants’ deposits.
However, note that if you own two or more flats in a purpose-built block of flats and live in one and rent out the other – this tenancy will then be an assured shorthold tenancy as the Housing Act specifically provides for this.
Despite the fact that the deposit does not need to be protected, note that it is still the tenants’ money, and other rules relating to deposits will still apply. For example that landlords cannot make deductions for ‘fair wear and tear’ and may sometimes only be able to claim a percentage of the cost of a new replacement item to take account of ‘betterment’. Which is a rule which prevents landlords from profiting when replacing older items damaged by tenants with brand new ones.