In April 2007 (under the Housing Act 2004), measures were introduced providing that if the landlord failed to protect a deposit under an assured shorthold tenancy, within 14 days of receipt of that deposit, then the tenant could apply to the Court, which have the power to order the landlord to repay the tenant the deposit, plus a penalty of three times that amount. In addition, the landlord was prevented from seeking possession of the property by serving a Section 21 notice.
Over time, the sanctions for a failure to protect the deposit were eroded by various Court decisions. There have now been amendments introduced by the Localism Act 2011, which effectively revive the sanctions available against a landlord who fails to protect a deposit. These changes came into effect on 6 April 2012. Landlords and their letting agents must now comply with these new rules in order to avoid payment of a penalty, as well as restrictions on obtaining possession of their property:
- The landlord now has 30 days (instead of 14) from receipt of the deposit to comply with the rules and give the tenant the prescribed information
- If the landlord does not comply, the tenant can apply for a Court order, which can be made a notwithstanding compliance by the landlord in the interim
- The penalty payment is now set at a minimum of the amount of the deposit and a maximum of three times the deposit as decided by the Court
- The tenant can apply to the Court even if the tenancy has ended
- The landlord can conclude the tenancy by a Section 21 notice in accordance with the usual rules once the deposit has been provided, has been returned to the tenant, or the Court has made an order or the matter has been settled
Failure to comply with the new rules can lead to a significant and costly delay in obtaining possession. Also, as a result of this requirement for landlords to register the tenancy deposits, numerous campaigns by independent organisations/groups have been issued in order to bring the matter to the attention of the tenants.
These organisations provide processes in which tenants can check whether they could be due compensation of 1-3 times the value of the deposit. The process even provides sample letters of claim to send to the landlord.
These types of campaigns will only serve to bring a rise in tenants’ claims as so many tenants are still unaware that their deposit should be in a protected scheme. All landlords should, therefore, protect deposits in a registered scheme within 30 days of receipt of the deposit itself.
