Since inception the Tenancy Deposit Scheme introduced by the Housing Act 2004 was criticised for its ambiguity. There have been a number of court cases where even the judges find it hard to interpret. What was never meant to happen was that landlords ‘got off’ with protecting the deposit throughout the tenancy and only protected it if the tenants took action against them.
Section 184 of The Localism Act 2011 closes the loophole regarding deposit protection and removes any ambiguity in the interpretation of the previous regulations brought to the fore by cases such as Vision Enterprises Ltd v Tiensia and Honeysuckle Properties v Fletcher, McGrory and Whitworth in 2010.
In addition to this the deadline for protecting the deposit and issuing the prescribed information has been extended – thankfully – from 14 to 30 days. Although I have never had a problem with protecting deposits immediately I did do a dissertation for my Building Surveying degree about the scheme, so I realise it put a lot of pressure on some agents. One of my survey questions to landlords and property managers asked if 14 days from receipt of the deposit was sufficient time to protect the deposit. For larger managing agents and corporate landlords who process a number of tenancies every day it was not always long enough. Of those surveyed, nearly 50% of respondents thought it was too short.
In short, the provisions of the Localism Act 2011;-
- The deposit must be protected and prescribed information issued within 30 days of receipt of deposit.
- If the deposit is not protected within 30 days the tenant can take their landlord or agent to court.
- The deposit cannot be protected retrospectively if the tenant makes an application to the county court once the tenancy has ended.
- The award to the tenant for non-compliance has been changed to a discretionary amount between, not less than the amount of the deposit to three times the amount of the deposit.
- If the deposit is not protected 30 days of receipt a Section 21 Notice may not be served (unless the deposit is returned in full or in part with deductions being agreed by both parties).
Whilst many landlords and agents do still have a problem with tenancy deposits, if you play by the rules and act properly and responsibly it need not be a cause of concern. In my experience it is the landlords who have not taken deposits because they didn’t want to protect them who have come a cropper with tenants not serving proper notice, leaving with unpaid rent and/or damages. One of the often cited concerns is tenants will not pay the last month’s rent and use the deposit in lieu of it.
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