April 26th, 2011 
Paul 
STOP PRESS: COURTS HELP LANDLORDS!!!
Can Landlords really be forced to pay to their tenant three times the amount of the deposit, if they haven’t complied with the rules of a Tenant Deposit Scheme?
Since 6 April 2007 the Housing Act 2007 obligated landlords and managing agents to protect any deposit paid by a tenant with an authorised Tenant Deposit Scheme. There are 3 authorised deposit schemes: Deposit Protection Scheme, MYDeposit and the Tenancy Deposit Scheme.
The rules of each state that within 14 days the landlord must: -
(1) comply with the initial requirements of an authorised scheme in relation to the deposit;
(2) pay the deposit into the scheme; and
(3) give the required information to the tenant.
The initial requirements vary from scheme to scheme but generally include informing a tenant of the scheme in which the deposit has been placed, the scheme administrators contact details and the reference number under which the deposit is secured. The landlord must also provide the tenant with relevant information about the scheme within the same period.
What if the landlord fails to comply with his obligations?
If the Landlord was even one day late in complying with his obligations there were provisions in the Housing Act which suggested that:
- The court must order payment by the landlord of the deposit to the tenant or into a custodial scheme.
- 2. The court must order the landlord to pay the tenant a penalty equivalent to three times the amount of the deposit.
- Any section 21 notice served by a Landlord is automatically invalid (a Section 21 notice can be extremely useful when a landlord wants to evict a tenant).
These provisions have recently been subjected to scrutiny in the courts who have recently heard a number of cases (Tiensia v Vision Enterprises Limited t/a Universal Estates and Honeysuckle Properties v Fletcher, McGrory and Whitworth 2010) in which landlords were late in protecting the deposits and/or were late in complying with the information which must be given to the tenant within 14 days of receipt of the deposit.
Courts Back Landlords
The great news for landlords is that the courts have interpreted the legislation favourably for landlords. The landlord will be given the opportunity to ‘put their house in order’. Should the landlord remedy any failures prior to any court hearing date then the landlord will not be required to pay a penalty to the tenant equivalent to three times the deposit. However, if a landlord wants to evict the tenant and serve a Section 21 Notice he must first remedy the failures to comply even if the initial 14 day period for compliance has passed. The Landlord can then properly serve a Section 21 Notice and commence eviction proceedings in the normal way.
Landlords should always ensure they have complied with the Tenant Deposit Scheme provisions and remedy any breaches before serving the requisite legal notices to evict problem tenants and recover unpaid rent.
MS Law LLP provide a full range of expert legal services to Landlords and are specialists in tenant eviction and debt recovery. Contact us now on 0161 772 4500
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Great article, I do believe some penalties should be in place as the whole reason for starting the deposit scheme was to protect tenants from landlords who didn’t safeguard the deposits.
such a shame some landlords don’t take the time to understand their obligations – I still come across many landlords who still aren’t aware of the gas regs!
agreed debbie- the penalities need to have teeth in order to be of value. But some of the interpretation would have been too harsh, for example, preventing a landlod ever serving a valid section 21 notice and potentially giving the Landlord no remedy whatsoever to get the property back. As ever, it’s a case of balance that the legislators haven’t managed to strike. I think a fine of 3 months deposit would have been correct perhaps after a one warning policy.