Landlords are still being caught out with the tenant deposit protection rules, despite the fact that the rules on protecting tenancy deposits have been in place since 2007.
Here is a useful re-cap.
Put simply, if you do not protect a tenant’s deposit within 30 days of the deposit being paid, and serve on the tenant the correct prescribed information with a leaflet from the protection agency explaining how the scheme works, you will:
- Be in breach of the rules and subject to a fine (pay compensation to the tenant) of up to 3 times the deposit – so if for example you have taken a £750 deposit, you will have to pay the tenant back up to £3000. The tenant has up to 6 years to claim.
- You will be unable to serve a valid section 21 notice if for any reason you have to evict your tenant.
Serving on your tenant the correct information is not always good enough: they may deny they received it, so you must get proof that you served it.
Information Served should include:
- Statutory information (section 213 notice)
- A leaflet from the protection agency used explaining the rules
- A copy of the deposit protection certificate signed by the landlord or his agent.
This should include:
- Details of the tenancy deposit protection scheme used with contact details.
- How to make a claim if there is a deposit dispute
- A summary of what deductions can be made for
- How dispute resolution works
- What happens if one or other party fails to communicate
The Letting Agent
Ultimately, it is the landlord who is responsible for protecting the deposit, so if a letting agent lets down the landlord by failing to do so, within the time limits, the landlord pays. It is then of course incumbent upon the landlord to sue his agent for loss in negligence if that is necessary.
The rules apply across the UK to Assured Shorthold Tenancies or their equivalent. They do not apply if:
- you take in a lodger, living in the same household as a landlord
- student halls of residence
- pre-15 January 1989 regulated tenancies, or assured tenancies
- you have a common law tenancy
- commercial (business) tenancies
In England there are three approved schemes:
- Deposit Protection Service (DPS) – www.depositprotection.com
- Tenancy Deposit Scheme (TDS) – www.tenancydepositscheme.com
- Mydeposits – www.mydeposits.co.uk
Custodial or Insurance Scheme?
Landlords can either pay deposit money into the provider’s custodial tenancy deposit scheme or they can pay a premium to insure the deposit money retained by the landlord.
If landlords use a tenancy deposit protection insurance scheme, they will have to renew the insurance if they renew a tenancy, or when tenants stay on (periodic tenancy) after the end of the fixed term.
If landlords pay the deposit into a tenancy deposit custodial scheme, the deposit will continue to be protected as long as it remains there, and usually the scheme is free.
Deductions from a Deposit
At the end of the tenancy the landlord may wish to make deductions from the deposit if he or she thinks there are justifiable reasons for doing so. The tenancy agreement must state under what circumstance deductions can be made, and the deposit information provided to the tenant should refer to the appropriate clause in the agreement about deductions.
Most agreements have a clause allowing for deductions, for example, for:
- Damage to the property or its contents
- Cleaning and rubbish removal
- Rent arrears
- Legal costs involved with evictions
Over the intervening years there have been several changes to the legislation on tenant deposits which makes for a complicated set of deadlines which should have been met:
For deposits paid on or after 6 April 2012, landlords have 30 days to protect and serve the correct information.
For deposits paid from 6 April 2007 to 5 April 2012 landlords had until 6 May 2012 to protect and serve the information.
For deposits paid before 6 April 2007 landlords had until 23 June 2015 to protect and serve, if the tenancy had a fixed term that ended on or after 6 April 2007, and a replacement tenancy had not been signed – i.e., it is still a periodic tenancy.
For tenancies started before 6 April 2007 and first renewed before 6 April 2012 landlords had until 6 May 2012 to protect and serve.
If the deposit was paid before 6 April 2007, and the tenancy was first renewed on or after 6 April 2012, then the landlord had 30 days from the date the tenancy was renewed to protect and serve.
Landlords in Breach of the Rules
It is sometimes the case that landlords find themselves in breach of these rules when they need to evict a tenant, most commonly for rent arrears. They then discover that they cannot serve a valid section 21 notice (the most effective route to eviction) and on top of that the tenant can take them to court for compensation, which will also result in them paying a court fee as well.
In practice the court would probably off-set the fine against the rent arrears, but that’s no comfort to the landlord owned a lot of money.
Repay the Deposit
The only option then, to extricate themselves from this bind, is for the landlord to repay the deposit in full to their tenant, and hope that the tenant does not take them to court for compensation. Once the deposit is returned in full a valid (2 month) section 21 notice can be served and the 3-stage eviction process can proceed:
- 2 month section 21 notice
- Court application – form N5b or N5
- Court bailiff eviction
This whole process normally takes between 6 weeks and 3 months
Tenancies started after 1st October 2015
For assured shorthold tenancies (AST) commencing after this date, new rules apply when using section 21 evictions:
- The new prescribed (Form 6A) section 21 notice must be used
- The notice cannot be served in the first four months of as new AST and lasts for a maximum of 6 months
- A valid EPC must have been served on the tenant
- A valid gas safety certificate must have been served on the tenant
- The current version (when the tenancy started) of the government’s “How to Rent Guide” must have been served
- The deposit rules must have been fully complied with – see above
- If the property requires a licence from the local authority to rent, this must be in place and proof provided.
Notices available here: www.landlordzone.co.uk/documents
More information on deposit protection here
Tenancy Deposit Protection https://t.co/fTAiQZYSwE
— LandlordZONE (@LandlordZONE) February 23, 2017