All deposits (for rent up to £25,000 per annum) taken by landlords and letting agents for Assured Shorthold Tenancies in England and Wales, must be protected by a government approved tenancy deposit protection scheme.
If a deposit is not protected, the Landlord will be breaking the law. In the event of a Landlord needing to regain possession of the property they will be unable to use notice-only grounds for possession under Section 21 of the Housing Act 1988.
A Tenant is also entitled to apply for a court order requiring the deposit to be protected, or for the Prescribed information to be given to them. If the court finds
that the Landlord has failed to comply with these requirements, or that the deposit is not being held in accordance with an authorised scheme, the court must either:
Order the landlord to repay the deposit within 14 days of the issuing of the court order, or
Order the landlord to pay the deposit into the designated account held by the custodial scheme administrator.
The court must also order the Landlord to pay to the Tenant (or person who paid the deposit on his/her behalf) an amount equivalent to three times the deposit amount within 14 days of the making of the order.