Remember the Rules:
Tenancy deposits were introduced in April 2007 under the Housing Act 2004. The legislation was so badly drafted at the time that it has, following several test cases, most notably Superstrike Ltd vs. Marino Rodrigues  and Spencer v Taylor , had to be amended twice – in the Deregulation Act 2015 and the Housing and Planning Act 2016, along with changes to the section 21 rules.
This article applies primarily to English law. Although tenancy laws are similar in other jurisdictions, there may be significant differences. Always seek professional advice before making or not making important decisions.
Thousands of landlords have fallen foul of the deposit protection rules and rued the day they either did not find out about them or simply did not read the detail properly.
Not following the deposit rules means that you are subject to some heavy fines and you are prevented from using the Section 21 eviction process.
It is therefore very important that:
- Deposits are protected within 30 days of receiving them in one of the government approved schemes
- The statutory information (s213 Housing Act 2004) is served on the tenant, or on anyone else who pays the deposit, and any guarantor should be copied in
- Proof of serving is obtained
There has been some confusion in situations where landlords take deposits in advance of the tenancy starting (typically for student lets or foreign tenants) or where deposits are taken in instalments.
With advance deposits, to avoid falling foul of the rules, the deposit should be protected within 30 days of receipt, even though the tenancy has not started.
If deposits are to be taken in instalments (not a recommended practice) then each instalment must be protected within the 30 days.
Section 213 of the Housing Act sets out clearly (prescribes) the information required to be served and this is provided by the various schemes’ websites – DPS, MyDeposits and TDS.
Serving a copy of the scheme’s certificate and leaflet will satisfy most of the requirements but not all. You must point the tenant or deposit provider to the specific clause in the tenancy agreement which deals with the deposit deductions – items which can be deducted from the deposit, for example, cleaning, damage, rent arrears and legal expenses.
What if you are stuck with a tenancy where you did not follow the rules?
Despite the rules having been in place for at least 10 years, albeit the whole process has been confusing due to the badly written rules, it is perhaps unsurprising that a lot of landlords have found themselves in breach.
Tenants are entitled to bring a claim for up to three times the deposit if you have breached the rules, and if they do, there is no way to avoid the fine. What’s more, if you have ever renewed the tenancy, not having protected the deposit in the first place, the fines double up each time – there have been cases with multiple renewals where the fines have reached in the teens of thousands of pounds. What’s more, there are some no-win-no-fee lawyers who specialise in helping tenants collect these fines.
As far as being able to serve a valid Section 21 notice goes, if the unfortunate situation arises where you must evict, and you didn’t follow the deposit protection rules, the only way to do this is to return the deposit (or an agreed proportion of it) to the tenant before serving the notice.
Though there is no definitive court ruling on this as yet (August 2017), received wisdom has it that simply offering and return the money is sufficient; if the tenant returns the cheque, for example, tough, it’s been offered and that’s enough.