For a general view and background on tenancy deposits, please refer to the tenancy deposit guide. For those of you that are familiar with the legislation but have failed to protect your tenant(s) deposit, you’re in the right place.
Brief reminder of what is required to comply with the Tenancy Deposit Legislation
To be in compliance with the Section 213 Housing Act 2004, any money taken from a tenant as a security deposit must be protected in a Government approved scheme. Just to clarify, it is NOT a legal requirement to take a security deposit, so this legislation only applies to landlords that do take a deposit (which quite frankly is most).
When a deposit is protected the tenant, and anyone who provided funds towards the deposit, must be given the Deposit Protection Certificate and Prescribed Information for Tenants provided by the Deposit Protection Scheme which you have used. You have just 30 days from the date that the deposit was given to you in which to do this otherwise you have broken the law. NB. Make sure you have evidence that you have done it.
It’s also worth noting that ALL deposits ever taken must now be protected– even those taken before 2007 when the original deposit legislation was introduced (that was previously NOT the case). Landlords had until the 23rd June 2015 to protect deposits!
Once the deposit is protected and information given as above, you have complied with the law until the tenancy ends – even if you allow it to roll on (known as Statutory Periodic Tenancy) after the fixed term has ended.
I didn’t protect my tenant’s deposit!
If you are one of the many landlords or Letting Agents (yep, they screw up too, but that’s probably no surprise) who have not protected your tenants deposit you’ve got a problem. Well you know that otherwise you wouldn’t be reading this. Hello, welcome.
There have been so many changes to Deposit Protection Legislation, since it was foist upon us in the Housing Act 2004, it’s not surprising that so many landlords get it wrong– but unfortunately ignorance is no defence in law.
I am going to do this backwards because it is when a problem shows its ugly face that most landlords realise that they have screwed up, so let’s look at some of the most common scenarios (sadly, none of which will save you), and from my experience, when most landlords frantically start becoming concerned about their non-compliance…
1) My tenants are threatening me
Your tenant(s) has discovered they can prosecute you and potentially make a quick buck by seeking compensation for your failure to comply with the law. Either you pay compensation or face legal action.
This is unbelievably common, which is pretty sad.
2) I need to get rid of my tenant but I can’t serve a Section 21
The penny usually drops when you reach for a Section 21 Notice and read the notes which tell you what you have to do to serve a valid Notice on your tenant.
If the Deposit Protection Legislation has not been followed, you’re screwed – meaning your only option is the hassle of a Section 8 Notice where you must prove grounds for eviction (which you may not even have).
3) The Judge threw out my Section 21 because I had not protected the tenants deposit
Most savvy tenants will take advice when they are served with a Section 21 and one of the first questions they will be asked is “Did your landlord protect your deposit?” Followed by “Did he send you the legally required information about your deposit protection within 30 days?”
If they cannot answer YES to both questions they will be told to contest the Section 21 in court. That’s when the Judge will most likely look at the details and throw the case out of court, so here you are.
4) A bloke in the pub told me that I should have protected my tenants deposit – what is he talking about? I didn’t have a clue!
This is a typical case where the landlord has just one property, from when he moved in with his girlfriend, and hasn’t a clue about the landlord legal requirements. You have also heard through your sources that the tenant can gain compensation… and now you’re scared, wondering if it’s all true.
Yes, it’s true.
5) I forgot!
You forgot to protect the deposit and/or serve the prescribed information (not sure how many people will believe this one!).
Any of the above sound depressingly familiar? If your case is not one of the above (or similar), please leave a comment with the details…
I didn’t comply with the tenant deposit legislation– what can I do?
Now, let’s get to the crux of the matter.
As it stands, these are your options:
- Protect it now and serve the prescribed information hoping that if an issue arises and it goes to court the Judge will take the view “better late than never”
- Pay the deposit back to the tenant and hope that he doesn’t find out that he can get compensation
- If you’re trying to get rid of a rogue tenant, use a Section 8, with Grounds for eviction.
- Do nothing, but sit tight and pray that your tenants don’t realise protecting the deposit and serving the Prescribed Information is a legal requirement and/or they don’t care enough to seek compensation because you’ve been an amazing landlord.
Can I get in serious trouble for not protecting my tenant’s deposit? What can happen?
Putting it bluntly, you have broken the law and yes, this will have consequences.
- A tenant, who takes legal action, can expect to be awarded compensation because his legal rights have been denied. A Judge has the power to award between 100% and 300% of the deposit in compensation and may also instruct you to return the whole deposit. This can be an expensive loss, not just because of the compensation, but also if you actually need use the deposit to cover damages.
- Because you have not complied with the law, your rights to use legal process to remove a rogue tenant have been reduced. You can no longer use Section 21 of the 1988 Housing Act (which is typically the most efficient method of removing a rogue tenant).
How do I get rid of a tenant without serving a Section 21?
The latter consequence might leave you scratching your head, because now you might be wondering, “how do I get rid of a tenant if I haven’t protected the deposit and don’t have grounds for eviction (so essentially can’t serve a Section 8 notice)?”
This is the scary and heart-dropping reality…
The simple answer is you can’t. Serving a Section 21 is the only legal method of removing a tenant, known as “the no fault eviction process” because you do not need any grounds and often do not even need to go to Court if you have served a valid Notice. This is the main reason why you MUST COMPLY WITH THE TENANCY DEPOSIT LEGISLATION. Sorry for shouting, but it needs to be taken seriously.
However, in the event you are caught in this dilemma, you do have limited options…
- In reality, many tenants won’t cause a fuss- if you tell them you need the property back, they’re usually compliant (assuming you give plenty of notice and have a relatively good relationship with them). You might just get away with it.
- Assuming they do cause a fuss, offer to pay the tenant “compensation” to leave.
- Talk to the tenant and try to come to an agreement. At this point, it might be worth your time to check out a list of ways you can legally end a tenancy agreement.
My letting agent did not protect the deposit…
Your hired help has failed you. Common scenario.
So where do you stand in this case? Are you given the luxury of mercy? Unfortunately, you’re in the exact same position as if you have no association with a letting agent.
If you are using a Letting Agent and they do not protect your tenants deposit correctly– you’ll still ultimately be held responsible. Even if you have not touched a penny the law states that the deposit was taken on your behalf and therefore you are responsible. That’s why it’s essential to ensure that your Letting Agent is a member of a Property Redress Scheme (legally required since October 2014) so at least you will have redress if they screw up.
A Letting Agent cannot go to Court for Possession without the property owner, he can go with you as what is known as a “McKenzie Friend”. He can complete the Notices and other documents but you must sign them. Only a legally qualified person can represent you in Court.
Does anyone else have any additional tips to share? Do you have any experiences to share regarding this matter, weather you’re a landlord or a tenant? I’d love to hear your story!