Invaluable advice to all landlords – Don’t fall foul of the Tenancy Deposit Rules
This article briefly summarises and considers the protection of tenants’ deposits, highlighting the dangers for Landlords or their agents who fail to follow the new guidelines
Why do I need to comply with tenancy deposit rules?
Under the Housing Act 2004 s.212-215 landlords are penalised for not properly securing deposits. Pertinently, under those provisions the landlord or his agents are required to:
- comply with the ‘initial requirements’ of a tenancy deposit scheme within 14 days of receiving a deposit and give the tenant any ‘prescribed information’ required by the scheme (please see: http://www.rla.org.uk/docs/RLA_My_Deposits_Prescribed_Information.pdf).
What happens if you do not comply?
- Failure to do so would require a landlord to pay up to three times the deposit monies back to the tenant.*
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- Further, under s.215 a valid s.21 notice cannot be served on a tenant and this may prejudice other applications for possession (e.g section 8 possession proceedings based on rent arrears).
*However, the courts were acutely aware of the potential harshness of this rule for ‘innocent’ landlords who would be harshly punished for not complying with the rules. Therefore decisions such as Tiensia v Vision Enterprises Ltd [2011] 1 All ER 1059 and Gladehurst Properties Ltd –v- Farid Hashemi [2011] 4 All ER 556 sought to soften the impact of the penal element of the legislation, requiring a Landlord to protect the deposit before a hearing date in order to avoid punishment. As discussed below new legislation attempts to redress this issue and clarify the provisions, addressing the concerns raised in the above cases.
What is the current position?
The Localism Act 2011 s.184 amends some provisions of the Housing Act 2004 and reinforces the strict approach taken for any failure to comply with the initial requirements of a scheme, effectively reversing the decisions in Tiensia and Gladehurst Properties Ltd above. The new legislation should mean fairer and more proportionate action is taken against landlords who fail to comply with the new provisions.
In summary
- Protect the deposit and provide information to the tenant in the prescribed form within 30 days (previously 14 days) of receiving the deposit monies.
- The court has a discretion on setting the financial penalty for non-compliance between one and three times the deposit. Although we are not told on what basis they will exercise this discretion.
However, at the time of writing the above provisions are yet to come into force and will only come into force ‘on a date to be appointed’. Nevertheless the intention of Parliament is clear and agents and/or their landlords should ensure they take heed of the new rules and do not accidentally fall foul of the provisions.
The advice we are giving to our clients:
- Make sure that you register the deposit within 30 days of receipt.
- Ensure that that prescribed information is served upon all the tenants at the start of the tenancy and on any renewal.
- If you have not protected your deposit – give back the deposit to your tenants now.
- If you hold on to the deposit you are at risk to being sued/counter claimed (in any possession proceedings).
© GARNER & HANCOCK, November 2017
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