A landlord has been awarded compensation after a letting agent failed to protect a tenant’s deposit in a government-approved tenancy deposit scheme, despite being instructed on a full management basis.

The case highlights the continued risks around deposit compliance in the private rented sector, and how so-called “administrative errors” can still result in significant financial and legal exposure for landlords and agents alike.

Deposit failure comes to light

The landlord had appointed the agent on a fully managed service, which included responsibility for receiving, handling and protecting the tenant’s deposit.

At the start of the tenancy, the tenant paid a deposit equivalent to five weeks’ rent directly to the agent. The landlord says they assumed the deposit had been properly protected and that Prescribed Information had been served in line with statutory requirements.

Several months into the tenancy, however, the tenant informed the landlord that the deposit had not been protected.

The omission immediately created a compliance breach, leaving the landlord unable to serve a valid Section 21 notice and exposed to potential penalties, delays in possession proceedings and additional costs.

The landlord argued the agent had failed to act with reasonable skill, care and diligence, and had breached the terms of its management agreement.

Agent cites “administrative oversight”

The agent accepted the deposit had not been protected, describing the issue as an administrative oversight caused by internal staff error.

It said the failure was unintentional, that the landlord remained legally responsible for deposit compliance, and that the matter had been rectified once identified.

Case officer upholds complaint

In considering the evidence - including the signed management agreement, proof of deposit payment and confirmation from tenancy deposit schemes that no protection had been registered - the case officer upheld the complaint.

The case officer found the agent had received the deposit but failed to protect it within the statutory 30-day timeframe or serve the Prescribed Information.

An administrative error, the case officer noted, does not remove the requirement for agents to maintain adequate systems and oversight to ensure compliance.

While landlords retain ultimate legal responsibility, it was reasonable for the landlord to rely on a fully managed service. The failure, the case officer concluded, resulted in direct financial detriment, including delayed possession and loss of statutory protections.

Claim for three-times deposit rejected

The landlord sought damages equivalent to three times the deposit, arguing this reflected potential liability had a tenant brought a claim for non-protection.

However, the case officer found that although concerns about future liability had been raised, no tenant claim had been made. As such, it would not be appropriate to award compensation for a theoretical loss.

Actual losses awarded

The evidence showed that the landlord incurred additional legal costs as a direct result of the agent’s breach, and these were awarded.

The case officer also found the landlord had no option but to refund the deposit in full to the tenant, as it had not been protected. This prevented the landlord from using the funds to offset rent arrears or other tenancy breaches.

As the arrears exceeded the value of the deposit, the case officer ordered the agent to reimburse the full deposit, along with legal costs and compensation for poor service.

Why it matters

The ruling is a reminder that deposit protection failures are treated seriously, even where described as administrative mistakes.

It also reinforces the position that while landlords may delegate management responsibilities, they remain exposed when compliance systems fail.

The case officer made clear that letting agents are expected to operate robust controls and oversight processes, rather than relying on manual processes or informal checks.

Final word - Sean Hooker, Head of Redress  

“This case illustrates why delegation is not the same as resignation. Landlords rely on agents for professional expertise, and agents must be held accountable when they fail in their contractual duties. However, the law still views the landlord as the ultimate custodian of the tenancy.

An agent’s administrative error can remove your ability to manage your property effectively and result in significant financial loss. Trust your agent - but verify their work.”

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