In light of the recent Charalambous Court of Appeal case with its implications for tenancy deposit protection, it is crucial that landlords take action to safeguard their tenancy deposits when dealing with Assured Shorthold Tenancies.
In Charalambous a landlord served a section 21 notice under the Housing Act 1988 requiring possession of the property, which was subsequently held to be invalid as the landlord had failed to hold the tenant’s deposit in accordance with an authorised scheme.
Cases such as this clearly highlight to landlords and letting agents that they need to be aware and responsive to changes in legislation that might affect them and their tenants.
For landlords and letting agents, the message is clear. Protect your deposit, or risk having to return the tenants’ deposit before being able to serve a valid section 21 notice (seeking possession).
Regardless of whether a deposit was paid before the 2004 Act came into force, it is now unlawful for a deposit to be held otherwise than in accordance with an authorised scheme. As long as your deposit is registered with one of the three schemes; Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme, any nasty shocks can be eliminated.
For those landlords and letting agents unaware of the legal implications, the result may be that they are unable to evict a tenant until they have returned a deposit and may even then be susceptible to a damages claim.
Tenants may even bring a claim for three times the amount of the original deposit, which could have a huge impact on a landlord’s income. This is most likely if they have forgotten about a deposit, not protected it sufficiently, or have long-term tenants in occupancy that paid their deposit prior to the change. In addition, landlords may be under the illusion that a deposit paid prior to 6th April 2007 is exempt from the regulations.
At a time when both jobs and income are still vulnerable, ignorance is not an option. Even long-term, reliable tenants may encounter issues and be unable to pay their rent at some time, thus making an unprotected deposit a major concern.
Ensuring good relations with tenants and having the trusted advice of a reputable law firm will no doubt provide the peace of mind that a landlord needs. By maintaining a close relationship with a good law firm, landlords can minimise risk, increase the understanding of the consequences of legislation and ensure that key changes are made in the most effective manner.
Sarah McLoughlin, Senior Associate, Litigation and Dispute Resolution, B P Collins LLP