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Changes to the Tenancy Deposit Scheme

Since the introduction of the Tenancy Deposit Scheme in 2007 there have been a number of court cases concerning tenancy deposits and in particular the consequences of the landlord either failing to protect the deposit or providing the tenant with the prescribed information late.

Some of the more recent cases were favourable to landlords as the Courts decided that, providing a landlord had protected the deposit and given the prescribed information prior to any claim being decided, he would not face the financial penalties of between one to three times the amount of the deposit, even though the landlord was late in complying.

Under the Localism Act 2011 introduced in April 2012, a landlord must now pay the tenant’s deposit into a scheme within 30 days (previously 14 days) of receipt and must also provide the tenant with the prescribed information in the same time frame. However the difference is that this is now an absolute rule and late protection is no defence to a claim. It is important to recognise that the landlord is responsible for providing the prescribed information and the Tenancy Deposit Scheme will not provide this on their behalf.

Estate Agents should take note, as a High Court decision held, that if an agent receives a deposit and fails to protect it, the tenant can issue proceedings against the estate agent.

The consequences of not complying within 30 days is that the landlord will be unable to regain possession of the property pursuant to the service of a Section 21 Notice unless and until one of the following has happened:

(1) the deposit is returned to the tenant in full prior to service of the Section 21 Notice
(2) matters have been agreed between the landlord and tenant i.e. the amount of deductions
(3) a decision on the matter has been made by the Court.

Although the Court now has a discretion as to the amount of fine that can be levelled against the landlord (of between one to three times the amount of the deposit), there is now nothing to prevent a tenant from issuing proceedings against the landlord even though the tenancy has come to an end and the deposit has been returned to the tenant in full. So even if the tenant has suffered no loss the landlord will be penalised. Clearly the conduct of the landlord and tenant will have to be taken into consideration when imposing the amount of penalty.

If you are in any doubt as to whether or not a deposit has been protected, the best advice is to ensure that it is protected immediately and the relevant information is provided to the tenant. The landlord is not precluded from taking action pursuant to a Section 8 Notice but this is only likely to assist if the tenant falls into arrears on rent or there has been some other breach of covenant by the tenant.

For more information please contact Robert Cherry.

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