The importance of protecting the Tenancy Deposit
It has been compulsory since 6 April 2007 for tenancy deposits received under an Assured Shorthold Tenancy to be dealt with in accordance with an authorised scheme. Furthermore, since 6 April 2012 it is mandatory for tenancy deposits to be protected in a tenancy deposit scheme and prescribed information given to the tenant within 30 days of receipt.
The most common residential tenancy is an Assured Shorthold Tenancy and therefore the majority of residential landlords must comply with tenancy deposit protection rules.
This article summarises why it is important for landlords to protect a tenancy deposit received in relation to an Assured Shorthold Tenancy.
The purpose of a tenancy deposit scheme is to safeguard the tenant’s money and ensure it is returned to the tenant at the end of the tenancy unless there is good reason for the landlord to retain or deduct monies.
Failing to comply with the rules will affect the landlord’s ability to recover possession.
The penalties landlords may face for failing to protect the deposit and/or provide prescribed information within 30 days are:
1. Prohibition of section 21 proceedings
2. Compensation claim from tenant
Prohibition of section 21 proceedings
Landlords under an Assured Shorthold Tenancy who require possession of the property after expiry of the fixed term may wish to serve a section 21 Notice.
There is a strict procedure to follow to ensure a section 21 Notice is valid. This includes protecting the deposit and providing the tenant with a copy of the tenancy deposit scheme’s prescribed information within 30 days of receipt.
The above applies to Assured Shorthold Tenancies which commenced before 6 April 2007. Landlords who have failed to protect deposits received for Assured Shorthold Tenancies including statutory periodic tenancies pre-dating 6 April 2007 will not be liable for a compensation claim from the tenant, however they will still be prohibited from serving a section 21 notice for possession until such time the deposit is protected and prescribed information served or until the monies are returned to the tenant.
If the deposit is protected but the landlord failed to provide the tenant with the prescribed information within the 30 day timeframe the landlord cannot serve a valid section 21 notice until such time the information is provided to the tenant.
Landlords who have failed to protect deposits received after 6 April 2007 can rectify the situation and serve a valid section 21 notice by returning the monies to the tenant before serving the notice.
Additionally, deposits received since 1 June 2019 should not exceed 5 weeks’ rent. If the deposit does exceed 5 weeks’ rent the landlord will again be prohibited from serving a valid section 21 notice until such time the excess amount has been returned to the tenant.
Compensation claim from tenant
Tenants have the right to bring a claim against their landlord where the deposit is not protected and/or they have not been provided with the prescribed information within the 30 day timeframe. A claim can still be brought even if the deposit is protected but was outside of the timeframe.
Landlords will be ordered to compensate the tenant a sum between 1 and 3 times the amount of the deposit. When awarding the amount of compensation the landlord’s conduct will be taken into consideration. If the landlord was aware of their non-compliance they will likely be ordered to pay the higher sum of 3 times the amount of the deposit.
Landlords should be made aware that such claims can be brought by existing tenants during the tenancy or former tenants after the tenancy has ended.
If you are a landlord or a tenant requiring advice and assistance in relation to your tenancy please do not hesitate to contact Natalie Peacock on 01603 625231 or by email nlpeacock@cozens-hardy.com.