Residential Tenancy Deposits – Avoid Expensive Mistakes

Landlords of residential tenants could be forgiven for being confused about what they have to do to meet the requirements of the Tenancy Deposit Scheme.   When the original statutory scheme was introduced it was then undermined by cases which allowed landlords to virtually ignore it.   Some landlords and agents have got into the habit of ignoring the 30 day limit in the belief that they could put things right later.   That isn’t what Parliament intended, and the courts will not allow it in the future.

Landlords of residential tenants must now do all of the following within 30 days of the start of the tenancy:-

  • Protect the deposit, usually by putting it into one of the tenancy deposit schemes.
  • Serve a notice containing prescribed information, which includes the details of the scheme, how it can be contacted, and what the landlord may deduct from the deposit, plus, usually, the leaflet provided by the scheme.

There are serious penalties for landlords who do not comply.   If the landlord does not serve the notice on time, the court can order the landlord to pay the tenant a penalty of up to three times of the amount of the deposit.   The Court of Appeal has recently ordered a landlord to do that, and that case will be binding on the lower courts.  Landlords who miss that deadline must assume that the starting point will be that they will pay three times the deposit as a penalty.

If the Landlord has not protected the deposit in time the consequences are potentially more expensive.   Any s.21 Notice Requiring Possession is ineffective, as are any possession proceedings based on it.   That cannot be put right later unless and until the Landlord has paid the deposit back to the tenant and then served another Notice.   As a s.21 Notice normally has to give at least two months notice, that can seriously delay the ability of a landlord to get rid of a bad tenant.   Bad tenants are why landlords take deposits. If a Landlord starts possession proceedings based on a defective notice, they will not get possession, be ordered to pay a penalty and the tenant’s legal costs, and will have to start all over again – without the benefit of a deposit.

If you are considering letting residential property please contact Kathryn Lander.

If you have a problem with a residential tenancy please contact Neil Howlett or Andy Hambleton.