Tenancy deposit changes

Landlords need to be aware of the changes to tenancy deposit regulation that are happening from TODAY!

Landlords should all be aware of the basic requirements of the Tenancy Deposit Scheme (TDS) which requires a tenants deposit to be protected in one of the three government approved schemes. Up until today, April the 6th 2012,  the legislation seemed flawed and “spoke with a forked tongue!”  Whilst it talked about a fine of 3 times the deposit if the tenancy deposit was not paid into one of the schemes within 14 days.  The reality was that providing the landlord managed to protect it before the case had reached the county court then recent court cases were only awarding the tenants legal costs of the proceedings against the landlord, as in this recent court case.  In addition landlords could still seek an order for possession using a section 21 notice provided they had complied with the legislation first.

The reason for this anomaly was that the original legislation contained within the Housing Act 2004 was poorly drafted enabling an unscrupulous landlord to drive a coach and horses through it.  Landlords take note – NO MORE!

New tenancies created from the 6th April 2012

The Localism Bill has introduced the following changes to the legislation affecting tenancy deposits.

On the plus side landlords will have a longer period of 30 days to protect the deposit and to provide the tenant with the prescribed information. The previous 14 days was always ludicrously short given the many pressing requirements a landlord has at the start of a new tenancy.

However, now the statutory time limits will be absolute.  This means that financial penalties will apply after the expiry of the 30 day period.  Under the new legislation a landlord will no longer be able to avoid any financial sanctions arising from successful legal action from a tenant by protecting the deposit after the event.  This tougher approach is slightly softened by the fact that the courts have been handed discretion to impose a fine of between 1- 3 months of the protected deposit amount.

The other big change is that a landlord will no longer be able to seek possession under section 21 of the Housing Act if they have failed to register the deposit unless (a) they return the deposit to the tenant in full (or with deductions that have been agreed with the tenant), until any court proceedings issued by the tenant for non-protection of the deposit are concluded, withdrawn or settled and the landlord has served the prescribed information.  In summary this means that a landlord can no longer use the accelerated form of possession if they haven’t protected their tenants deposit.  This could make obtaining possession take a lot longer and be far more expensive into the bargain.

A tenancy created prior to 6th April

I was contacted this week by a Property Hawk landlord extremely worried because she had inadvertently not protected her tenants’ deposit and wanted to know what she could do to avoid the full wrath of the new law.

Luckily, the ‘law makers’ have given landlords a 30 day grace period.  This means as long as the landlord protects or hands back the tenants deposit during this time the new regulations won’t affect them.  The new regulations will cover all new tenancies created from the 6th April and apply to court proceedings on and after this date.

The message to landlords is clear.  The ‘loophole’ has been closed and they will now have to take the Tenancy Deposit Scheme seriously unless they want to risk being ‘taken to the cleaners’ by their tenants!

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