Residential Landlords Deposits - have you protected yourself?

Summary

The recent case of Ayannuga v Swindells has shown that the courts are likely to have zero tolerance and impose a maximum sanction of three times the deposit sum to be paid by the landlord to the tenant if the landlord does not give proper notice to the tenant about the deposit within the set time limit. The landlord will not avoid this penalty by giving late or retrospective notice to the tenant even if the landlord has complied with the deposit rules and the deposit is properly protected.

The Law – before 6 April 2012

Since 6 April 2007, if a landlord took a deposit for an Assured Shorthold Tenancy ('AST') it was obliged to:

  • protect the deposit by lodging or insuring it with a tenancy deposit protection scheme; and
  • within 14 days of taking the deposit, provide the tenant with information as to how the deposit was being protected.

Where a landlord failed to comply with these requirements, the tenant could apply to court to claim the return of the deposit, together with a penalty sum of three times the value of the deposit. Furthermore, the failure to protect the deposit also prevented the landlord from gaining a possession order if the tenant later failed to vacate.

Case law developed this position so that a landlord who had protected the deposit and provided the requisite information late, albeit before the court hearing, was not liable for the penalty or precluded from recovering possession.

The Law - since 6 April 2012

The main changes are:

  • the landlord will have 30 days, rather than 14, to protect the deposit and provide the prescribed information;
  • if the landlord does not comply, the court must order the landlord to return the deposit and pay a penalty sum to the tenant;
  • the penalty is between one and three times the amount of the deposit but at the courts discretion; and
  • the tenant can still apply to the court for the return of the deposit and penalty payment even after the tenancy has ended.

Comment

It is likely that, upon a tenant's successful application for the penalty payment, the court will award costs against the landlord and compensation even if the deposit is protected so legal advice should be sought early to try to minimise the landlord's exposure. However, the only safe course of action is to adhere to the legislation by protecting the deposit and supplying the required information to the tenant within 30 days of receiving the deposit. If you use a lettings agent, you must be clear as to who is going to protect the deposit and take these steps and, if it is the agent, confirm this in writing.

 

June 2013


For further information please contact Richard Manyon on 020 7465 4456 or rmanyon@phb.co.uk.



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