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I Haven’t Protected My Tenants Deposit Into A Scheme With In 14 Days

02 Oct 2009

I received this email earlier today. It’s an interesting question, with a rather ropey answer (which works in the favour of the landlord):

I have one property. My tenant has been with me for the last 2 years. Initially via an agent. Agents were charging a fortune and were no good, so I took it on myself. Deposit was registered via the agent. When I took over, the deposit was transfered to my account. We have signed a new tenancy agreement for 12 months, but I have simply forgotten to protect the deposit, and its been three months since the start of the agreement. I am a member of the mydeposits, but I am afraid that if I proceed to protect the deposit, then that will raise the tenants attention (in terms of taking legal action for not protecting within 14 days), and they could hold it against me. Right now they are happy (polish) tenants and I don’t want to rock the boat.

Any ideas?

Thanks for your time.

Alf

Ok, firstly, this is what the House Act 2004 says:

213 Requirements relating to tenancy deposits
(3) Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with the date on which it is received.

So there is no question, a deposit needs to be protected with in 14 days where a tenancy deposit in connection with a shorthold tenancy.

What’s the penalty for not securing the deposit?

This is what the house act says about that:

214 Proceedings relating to tenancy deposits

(3) The court must, as it thinks fit, either-

(a) order the person who appears to the court to be holding the deposit to repay it to the applicant, or

(b) order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme, within the period of 14 days beginning with the date of the making of the order.

(4) The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

This is where it gets interesting (in my geeky opinion). If, before the court case, the landlord has either repaid the deposit to the tenant or protected it, then the court cannot order what has already been done. If the court cannot make an order under s214(3), then s214(4) doesn’t apply.

Conclusion

So from my understanding (from what I’ve read), a landlord cannot be prosecuted for not securing a deposit with in 14 days as long as the deposit is protected or returned before a court hearing. Someone please correct me if I’m wrong.

In any case, it’s imperative that a landlord DOES protect deposits. It’s actually a good scheme, and prevents all kinds of problems.

So, if I were Alf, I wouldn’t worry because it sounds like a genuine mistake, and I would definitely secure the deposit sooner than later. The tenants would probably understand, consequently wouldn’t even think twice about it.

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Talk / 12 Comments left so far

Nick wrote this on 2009-10-02 14:47:19 Yep - that's what the Courts have found so far 1

Mike wrote this on 2010-04-01 13:54:20 I could see that if s214(4) was s214(c) but as it stands alone it reads to me the Act meant for it be be treated separately as a penalty for a previous action. 2

Nick wrote this on 2010-04-01 14:34:51 Mike - Google it there was an appeal decision last week, although the appeal is being appealed. Basically the judge found that although the law says 14 days it also says follow the laws of the deposit scheme, and the deposit scheme doesn't give a time limit. As the Landlord had followed the rules of the deposit scheme and secured the deposit once they realised the breach no penalty was due.

Of course it may yet change again, but that's the current state of play today. 3

CF wrote this on 2010-04-21 08:33:58 When my tenancy began my landlord informed me via email that she had put my deposit into the deposit scheme within 14 days observing she 'was required by law to do so' but it turns out that she actually did not do it. So for the duration of the tenancy I have believed she did, but now with a few weeks to go it turns out this is not the case. If I had known this to be the case I would have pushed the issue and made her do so even if it was after the 14 days just to ensure the money was safe. What should I do? What can I do if she tries to withhold any part of my deposit? 4

SJC wrote this on 2010-04-28 10:37:58 I will admit from the outset that I am a tenant so you can see the bias in my response.

The 3 * deposit fine was meant to act as a deterrent to bad landlords/agents for not following the law.

I have read several blogs on this matter and they point to several cases whereby the judge has effectively let the landlord off the hook if by the time of the court case the deposit had either been paid back or correctly deposited in a protection scheme.

I guess for the majority of landlords and tenants this is a good result. The landlord did not pay a fine and the tenant either has their deposit or it is secured.

However, in my mind this encourages the following behaviour. Bad agents/landlords can continue to keep the deposit money unsecured earning interest from it until a tenant makes a fuss and then as long as they take some action they will not be fined.

If the fine occurred in the majority of cases then it would not be worth the risk.
In addition, if fines were imposed more landlords would abide by the law meaning less tenants having to taken stressful court action and less would get into the situation CF describes. 5

rob mcewen wrote this on 2010-06-01 19:05:43 if my landlord has not protected my deposit can they issue me with a section 21 to end the tenancy.i am due out on july 1st and have found a property to move into but my landlord is very untrustworthy and has told me they will give me my deposit back on the day i leave.i have been told by a friend that if the landlord hasn't protected my deposit the section 21 notice to seek possession has no legality to it until deposit protected. 6

Nick wrote this on 2010-06-02 14:05:29 Your friend is right. 7

rob mcewen wrote this on 2010-06-02 15:24:42 thanks for that nick.i have tried to be reasonable with my landlord when i told them a couple of months ago my deposit should be protected.still hasn't done it so will seek legal advice now. 8

Nick wrote this on 2010-06-02 15:47:41 Yes - never do anything off internet advice alone, only act off professional advice. Not only can your LL not evict you but when you do go, he has to pay you 3x the deposit back. Of course your best bet may be to settle in as a protected tenant & offer to buy the property off him at 30% BMV (that's the going rate for protected tenants). 9

rob mcewen wrote this on 2010-06-02 21:31:44 hmmm!! good advice nick but not practical.i am registered disabled and recently had surgery to c-spine,so having been out of work for some 5 years(living off the state as some people more fortunate call it!!) i couldn't afford to buy the front door at the moment!if i do get 3x the deposit though i may thank you by buying the front and back doors and sending you the front one framed and polished.(next day delivery of course) not to stirr things up on your great site though nick..i do find in my little experience of being a tenant,so far,that the female sex are generally quite ruthless in their roles as landlords and thank god our last few prime ministers have been men.get rid of the queen and this country might get it,s balls back.balls back nearly being an anagram of ballack..who plays for chelsea!!
i will let you know how i get on. 10

sarah wrote this on 2010-07-01 19:19:32 I have been a landlord for the 1st time & will never do it again. I simply didnt know enough about renting & the last time my husband had rented out was 8 years ago. I never put the deposit into a protected scheme, the tenant never asked - Ive only just realised now at the end of the tenancy how important it was. when the tenant moved out they had redecorated badly, broken doors, wardrobes& drawers. I calculated costs & returned a cheque for what was left (a fifth of the rent) alongwith a letter explaining everything - i couldnt talk to tenant as after a string of abusive phone calls I refused to take anymore. during their rent they fixed a tap & gave us a fake invoice for it, taking the cost out of the rent (half of it)which we havent even raised with tenant.
Is it worth me putting the rest of the deposit into a scheme now? if she takes me to court & Im unable to pay 3x the amount will I be allowed to pay it back monthly? thank you for any advice you can give me. 11

Not happy!!! wrote this on 2010-07-20 12:31:35 Can anyone please give me some advice?

After a long time searching for a property to live in, I was fortunate enough to come across a house where the tenants were moving out. I spoke to the tenants and I asked them about the property and who the landlord was etc... They gave me his contact details and I arranged to meet him to look at the house. Everything was fine. He was OK with the fact I needed to claim housing benefit and everything was sorted out. I signed the six month tenancy contract and I paid him a £400 deposit and a month up front rent.

When I moved in, I asked him if it was OK to set up a standing order to pay him the rent and he said yes. I was told that he would post me out the details to set it up and I never thought any more about it.

When it came to paying the first months rent, I phoned him to remind him that he had not sent me the details to set up the standing order and he apologised, saying that he had been busy and was it OK to come around collect the rent. This was OK by me and he arrived to pick it up. I asked him again about the standing order, but this time he asked me if I didn't mind, would it be OK if he continued to come to collect the rent in person.
I assumed that maybe he wanted to do this so that he could keep an eye on the property, but being confident in myself that there was no way I would do anything to harm it, I agreed and we arranged for him to come and collect it when it is due next month.

Today, I had someone knock on the door, enquiring as to whether anyone was living in this house. He told me that he had been contacted by a company called Countrywide and that they had asked him to confirm if anyone was living here.
The reason for this, was because this house was involved in a court case. He could not tell me himself what the court case was about, but on confirming I was the tenant, he phoned up the Countrywide company and passed on my details to them so that they could ask me some questions.

I received a phone call five minutes after this man had left and I spoke to someone who informed me that the house was repossessed by the bank and that I was actually living here illegally even though I had a contract signed by the landlord.

The landlord had failed to pay the mortgage on this house and he knew that it had been repossessed, but still went ahead and allowed me to sign a contract.

I have also found out that the £400 bond which I paid him has not been protected and I will now lose this as the landlord is being made bankrupt!

The bank in good faith have agreed to allow me to remain in the house for the remainder of the contract as I signed the contract in good faith and as far as they are concerned, I have done no wrong.

The problem it raises for me, is when the contract runs out, I will not be able to get my bond back and because of this, I will not be able to get another house. It is already difficult enough finding property when unemployed, but now because of this landlord's actions, I am probably going to end up homeless!

I know trying to take him to court myself is a waste of time, because as he is being made bankrupt, I will get nothing.
Does anyone know of any schemes which apply should the landlord fail to protect the bond? Is there anyway of claiming criminal actions against this person? Surely what he has done must amount to fraud at the very least?

Any advice would be appreciated. 12