Associate solicitor Katie Lofthouse from WHN’s dispute resolution team, highlights a tenant’s right to have a rental deposit protected and what action can be taken if the landlord fails to protect the deposit.
New requirements came into force on April 6, 2007, requiring landlords to protect a tenant’s deposit within 30 days of receipt and to provide prescribed information about where the deposit is protected – also within 30 days.
What are the requirements?
A landlord must protect any deposit received after April 6, 2007, in respect of an assured shorthold tenancy, where rent is up to £100,000 a year. Furthermore, if you paid a deposit prior to April 6, 2007, for an assured short hold tenancy, and it subsequently became a periodic tenancy, the deposit must be protected as the law considers a ‘periodic tenancy’ as a new tenancy.
The requirements, which are set out in the Housing Act 214, were put in place to protect tenants from landlords unfairly refusing to return their deposit. Under section 213 of the Act, a landlord or lettings agent cannot receive a deposit in relation to an assured shorthold tenancy, unless it meets these requirements.
How can my tenant deposit be protected?
There are two ways in which a landlord can protect a deposit. The first is through the custodial scheme. This is where the landlord pays your deposit to one of the three government-backed tenancy deposit schemes. The scheme will keep the deposit throughout the tenancy and repay it when the tenancy comes to an end, in accordance with any agreement the landlord and tenant have between them. The backed schemes are: Deposit Protection Service; MyDeposits and Tenancy Deposit Scheme.
If there is no agreement in respect of repayment of the deposit, the scheme will adjudicate on any deductions the landlord wishes to subtract from the deposit before it is repaid to the tenant. There is only one custodial scheme authorised by the government – this is offered by Tenancy Deposit Scheme
The second method that a landlord can protect a deposit is through an insurance-backed scheme. The landlord registers a deposit with the scheme and pays the scheme a fee to protect it. However, the landlord keeps hold of the deposit throughout the tenancy.
If there are any disputes in relation to the deposit at the end of the tenancy, the scheme will ask the landlord to send the deposit monies to them, and it is adjudicated in the same way as through the custodial scheme.
What if my landlord fails to comply with the requirements?
Should your landlord fail to either protect your deposit within 30 days of receipt of your deposit or provide you with the prescribed information within 30 days of receipt of your deposit, there are two consequences.
Firstly, in circumstances where the landlord has failed to protect your deposit, they will be unable to serve you with a valid section 21 possession notice requiring you to give up possession of the property, unless they repay the deposit to you.
If you receive a section 21 notice before your landlord has returned the deposit to you, the notice will be invalid, and your landlord will not be able to obtain a possession order against you.
In circumstances where your landlord protected your deposit, but failed to provide you with the prescribed information, your landlord can remedy the breach by serving you with the prescribed information, prior to service of the section 21 notice. In this instance, there may be financial penalties to your landlord which are set out below.
Secondly, you will be entitled to bring a civil claim against your landlord for compensation, as a result of their breach. Under section 214 of the Housing Act 2014, if your tenancy has come to an end and the court is satisfied the landlord has breached the deposit requirements to protect the deposit, the court must make an order that your landlord repays the deposit. This must be paid to you or into the authorised custodial deposit protection scheme within 14 days.
Furthermore, the court must order your landlord to pay you a sum of money no less than the amount of the deposit, but no more than three times the amount of the deposit. When assessing what payment your landlord should make to you, the court will take into consideration the circumstances of your case.
Based at WHN’s Clitheroe office, Katie has extensive experience in a range of litigation matters including settlement agreements, contractual disputes, contentious probate disputes and debt recovery. If you believe your landlord has failed to comply with the requirements outlined above, Katie can assess the merits of your potential claim and assist you throughout the claim process on a ‘no win, no fee’ basis. You can contact Katie on 01200 408300 or by email: email@example.com