Landlords be aware! Deposit protection is upon you!

Most landlords and letting agents require a deposit from tenants as a security against damages or unpaid rents. Often, tenants have a hard time getting their deposits back when they leave. Since April 2007, the law has required landlords to use a tenancy deposit protection scheme that will safeguard this deposits to make sure tenants get it back, as long as they are entitled to it. It is not surprising however that some landlords are still blissfully ignorant of this fact.

Penalties for not complying with the legislation could be severe. If landlords fail to protect their tenant’’’s deposit or fail to inform them about this scheme, then they have no right to regain possession of their property under Section 21 (notice only). Once taken to court, the court decides how much fine the landlord should pay their tenant, it will be around one to three times the amount of the deposit. There was one case in Cardiff where a landlord was asked to pay three times the deposit as a penalty (3 x 900 = 2700) plus refund the deposit in full.

But some landlords still get away with it due to a loophole in this legislation. A court of appeal decision in late 2010 allowed a landlord to protect his tenant’’s deposit even after he was brought to court already, up to the point before the judge gave his judgment. This decision defeats the purpose of the legislation in the first place. It meant that some landlords would not protect the deposit until they are brought to court, and they don’t have to if they are not.

Luckily for tenants, the law is now revised to address this loophole. Landlords are now required to secure their tenant’s deposit within 30 days upon the receipt of deposit. These changes will affect all tenancy agreements where deposits are taken and situations where deposits have already been taken, where the existing requirement has not been complied with.

The rule preventing the service of a Section 21 notice to quit remains, as long as the deposit is being held and it is unprotected. The right to serve a notice can only be regained if the deposit is returned. Crucially, liability to pay the penalty will remain, even if the right to serve notice is regained.

To extend the risks faced by non-compliant landlords, penalties for failing to protect the deposit can now be claimed even when the tenancy has ended, for up to a period of six years from the point of expiry of the 30 day period, even if the deposit has been returned. The consequences of breach of the amended legislation are severe, it could badly hurt the landlord’’s wallet, and they also face the risk of losing their property. It is therefore more important than ever that landlords have regard to their legal obligations before entering into any tenancy agreements.

Live with passion,
Brett

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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