Tenancy Deposit Fines:

The deposit protection rules introduced in April 2007 have proved to be something on a minefield for landlords and letting agents. One might think it would be a simple process to introduce rules which would allow tenants to have their tenancy security deposits protected during the course of a tenancy, so that repayment or deductions is a fair process between both parties, but this has proved to be far from the case in practice.

As numerous cases went to court over fines and disputes, several precedents were set and there has needed to be several amendments to the rules in various Acts of Parliament, since the original legislation appeared in the Housing Act 2004.

Experts argue that the original legislation was poorly drafted, and so it would seem, as it has created several serious anomalies, one of which led to the seemingly ridiculous situation where a deposit had to be re-protected, and the statutory information re-served on the tenant, every time the tenancy was renewed, or even when it became periodic.

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A court ruling led to thousands of landlords and agents being in breach of the rules and subject to a fine, through no fault of their own – it was a shambles.  Superstrike Ltd vs. Marino Rodrigues [2013]

The situation was largely corrected (Deregulation Act 2015) and after this most people in the industry then reasonably assumed that there was no longer a need to re-protect a deposit on renewal, or re-served the statutory information, once the original tenancy deposit had been protected.

The is in fact the case, but, where the deposit protection rules on the original tenancy had not complied, to the letter, e.g., protecting within the prescribed period of time, then any subsequent tenancy would require the deposit to be properly protected in accordance with the rules.

It just goes to show how important it is to comply with these legal rules – to the letter – when you realise that any breach in this situation leads to not only a fine of 3-times the deposit, but this for every renewed tenancy where no further protection is made.  So, for example, an original tenancy with a deposit of £900, where the rules had been breached, and renewed, for example, 3 times, would lead to a fine of £1200 x 3 x 4 = £14,000.00

With the advent of the “ambulance chaser” style solicitors specialising in helping tenants win compensation for breaches of tenancy deposit rules on a no win no fee basis, there is a big incetive for them, and many landlords could find themselves paying out these stunning fines.

Just such a case came to light recently, as reported in the Letting Update Journal of July 2017 where a fine of £18276 was due from a landlord.

The solicitor asked for immediate settlement from this landlord pending court, and he was indeed liable. The landlord’s agent had failed to protect the deposit of £2030 and would no doubt be liable in negligence to the landlord for failing to protect the original deposit within the then 14 days window allowed, and subsequently on 3 renewals. The fine would have been even higher had not the original tenancy been time barred under the Statute of Limitations Act 1980.

It is important to remember that landlords are ultimately responsible for their agent’s actions and landlords and agents should note that:

1 – There is no need to re-protect a deposit and re-serve the prescribed information (s213 Notice) when the tenancy is renewed or becomes statutory periodic, when otherwise the tenancy remains the same, providing the correct procedures were followed for the first tenancy.

2 – Even though (1) applies, it may still be necessary to follow specific deposit scheme rules, such as informing the scheme of a change, or paying a renewal fee.

Tenancy Deposit Schemes – UK Parliament

Tenancy Deposits, Superstrike and the Deregulation Act

The New Tenancy Deposit Rules

2 COMMENTS

  1. It should be noted that even though serving the prescribed information again is no longer required when a replacement tenancy is created, re-protection may be required.

    Indeed, “it may still be necessary to follow specific deposit scheme rules” means exactly that as, in law, “protecting the deposit” does not mean anything apart from following the deposit scheme’s rules.

  2. Deposit Protection was introduced in 2007, not 2017.

    The Housing Act that introduced it was the Housing Act of 2004, not 2002.

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