Landlords Beware!

Most residential landlords will have at least a basic awareness of their legal obligations when it comes to taking deposits from their tenants. They will know that any deposit paid by their tenant under a residential Assured Shorthold Tenancy – which most residential tenancies nowadays are – will need to be paid into a registered tenancy deposit scheme within 30 days of receipt (or within 14 days if the deposit was received prior to 6 April 2012). And most will know that their tenants also have to be provided with certain information about the deposit scheme, known as ‘Prescribed Information’.

What we have noticed, though, is that many landlords are not aware of the consequences for failing to comply. To be fair, this is at least partly down to the fact that the law in this area is regularly changing and it is hard for the layman to keep up with it. But savvy tenants are keeping up and landlords need to as well.

There are two general sanctions for failure to comply and they can be potentially quite significant.

The first is that, if the landlord does not register the deposit or give the Prescribed Information in time, the tenant can apply to the court for an order that their landlord to pay them a penalty of between one to three times the amount of the deposit. This penalty can be imposed in addition to an order that the landlord return the deposit itself to the tenant and that the landlord pay the tenants costs.

Landlords used to be able to avoid this penalty by registering the deposit or providing the prescribed information late but before the court hearing. Unfortunately, the Government closed off this ‘get-out’ in 2011. Now, if the deposit is not protected and the prescribed information is not given in time, the damage is done and a fine MUST be imposed by the court if the tenant applies for it.

Savvy tenants and claims management companies – like those responsible for those tea-time calls urging us to consider PPI or personal injury claims – are already onto this. And claims by tenants are definitely coming across our radar more and more often.

The second possible consequence of non-compliance is that the landlord may be prevented from using a section 21 notice to get possession of their property back from the tenant. Remember that a section 21 notice allows the landlord to recover possession without a reason. If this procedure cannot be used, possession can only be recovered in certain situations. Non-compliance can sometimes be fixed to allow the section 21 procedure to be used. For example, the deposit might be returned to the tenant and the prescribed information given late. But this will involve additional time and money, and a degree of uncertainty, that can be avoided.

So, landlords, don’t get caught out! If you take a deposit, know what your obligations are and make sure you comply.

by Kim Hurley from the Wisbech office