Deposit protection from exactly When?

[ohdearme]

I hear now that the deposit must be registered from 14 days from any first payment received from the tenant. Does that mean that if the prospective tenant pays, say a weeks rent to hold the property, you must register it?

Hope not, please someone clarify, thank you
Alan

[jjlandlord]

I hear now that the deposit must be registered from 14 days from any first payment received from the tenant.

Has always been the case since deposits must be protected.

Does that mean that if the prospective tenant pays, say a weeks rent to hold the property, you must register it?

No since this holding deposit is not a security deposit for an actual tenancy.


Are you a letting agent?

[ohdearme]

Yes.

Sorry the answer confusing, one says it has always been, sound like yes, the other says no.
My understanding was that any preliminary or holding monies were not considered deposit for the purposes of deposit law and the yes answer seemed to be the one.

Help always appreciated.
Alan

[Snorkerz]

A Holding Deposit and a Tenancy Deposit are 2 different things. A Tencncy does not commence until the tenant takes possession, therefore a tenancy deposit can not exist before the commencement of the tenancy.

The current law is that a Holding Deposit does not need protection, once it becomes a Tenancy Deposit it needs protecting within 14 days.

The Localism Act will extend that to 30 days - but the penalties for non-compliance will change too.

[jjlandlord]

Holding deposits are not tenancy deposits in the sense of the Housing Act 2004, so do not need protecting.

I am not convinced that a tenancy deposit only becomes so when the tenancy begins, though.

[Snorkerz]

How can it be a tenancy deposit when there is no tenancy?

Gladehurst Properties Ltd v Hashemi limited section 214 claims to existing tenancies. I accept that case goes out of the window with the 2012 Act but that acto only incorporates "Tenancies that have ended" (ie have already existed and so continue to be relevant).

[jjlandlord]

In my view, there can be a tenancy deposit before the tenancy starts because it is a deposit received in "connection to a shorthold tenancy" and for the defined purpose.

However, indeed one is only "the landlord" during the tenancy. (Gladehurst Properties Ltd v Hashemi limited relied on this)

I find the drafting of s.213 confusing:

(1)Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.

As per above, I would think this could happen before the tenancy begins.

But

(4)For the purposes of this section “the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.

This can only occur once the tenancy has begun.

So probably nothing to do until tenancy begins.

[ohdearme]

Many thanks to you, I am ironically rather pleased that it is not that clear, so perhaps trouble maker tenants will keep their distance.

Best

Alan

[Snorkerz]

Many thanks to you, I am ironically rather pleased that it is not that clear, so perhaps trouble maker tenants will keep their distance.

The unclarity, especially once the Localism Act comes into effect, means there will be lots of claims against landlords/agents with tenants attempting to assert their understanding of the law. Does it really make them troublemakers if their understanding of a complex issue is different to yours (especially as you don't know if your version is right!)? The 2004 Act didn't gain clarity until cases like Draycott, Tiensa, Gladehurst and Honeysuckle made it as far as the appeal court - and they were 3-4 years after enactment. Three to four years of uncertainty in a business that has a difficult enough job to convince it's customers that everything is above board. That doesn't sound good to me.

[Lawcruncher]

I also had noted that some sub-sections of section 213 refer to "the person" and some to "the landlord" and decided not to bother trying to work out if it was significant. If subsections (3) and (5) are taken literally then no action would need to be taken if the landlord's agent never hands the deposit to the landlord - I cannot think that that can be the intention.

As for sub-section (1) I think we could get into convoluted arguments if we start talking about tenancies not existing when payment is made. I think keep it simple and start counting from the day the tenant pays. With 30 days soon available to effect protection there should be no problem in practice if you are taking the deposit no more than a week before the tenancy is scheduled to begin.