I Haven’t Protected My Tenant’s Deposit, What Should I Do?

For a general overview 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 for one reason or another, 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 with in 30 days of receiving it. Just to clarify, it is NOT a legal requirement to take a deposit, so this legislation only applies to those landlords that do (which, quite frankly, is most).

After the deposit is protected, the tenant must be given the Prescribed Information related to the protection of the deposit, also with in 30 days. 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 the proscribed information is served with in the allocated time, 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!

Mr Forgetful
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. More about what to do in this scenario below.

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:

  • Recommended solution: 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, although it might be difficult to explain *why* you’re giving it back.
  • 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.

If your tenant hasn’t mentioned anything…

There’s a good chance your tenant isn’t aware of the tenancy deposit legislation or the ramifications of failing to comply. It’s also not unusual for tenants to be aware, but waive their right to prosecute because their landlord has been reasonable throughout the tenancy.

The point here is that you don’t want to give your tenant a reason to look into the legislation or exercise their right to claim compensation.

  • The most common reason why tenants proceed to take legal action is because they feel screwed about the return of their deposit (i.e. when landlords try to make deductions over trivial and menial damages, which actually, quite often fall under wear and tear). So when it’s time for them to vacate, forget the temptation to deduct £90 for carpet cleaning, or £50 for picture hook repair, just let it go. Otherwise they may start looking into their rights. Generally speaking, biting your lip and absorbing those costs is the safest and cheapest option!
  • The second most common reason is failure to complete repairs promptly, or making repairs at all. Ignoring your duty to maintain and repair is a sure-fire of pissing your tenants off, consequently giving them reason to prosecute given the opportunity. So with that in mind, and ethics aside, it might be sensible to ensure your attend to repairs and maintenance issues promptly, and generally be a good landlord all round (you should be anyways, mind you!).

    It’s also worth noting that if your tenant does take the matter to court to seek compensation (regardless of whether you’ve been a good or bad landlord), some Judges do take into consideration how the landlord has conducted themselves during the tenancy before determining how much they should be penalised.

Can I get in serious trouble for not protecting my tenant’s deposit? What can happen?

Putting it bluntly, you have broken the law, so yes, there can be 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 often the most efficient method of removing a rogue tenant).

My tenant is threatening me with legal action, what should I do?

Ok, so presumably shit has hit the fan; your tenant has discovered you failed to comply with the deposit legislation, and now they’re after a handsome payout. Unfortunately, this is becoming a terribly familiar scenario, rightly or wrongly so.

What to do at this stage will depend on the individual circumstances, so there isn’t a simple solution for all. However, there’s more information available in the “ways you can legally end a tenancy agreement.

My letting agent did not protect the deposit…

Oh dear.

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!

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320 Comments- Join The Conversation...

Showing 270 - 320 comments (out of 320)
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Simon Pambin 4th December, 2016 @ 15:08

Hi Sarah,

Well, you've made a right goblin's knickers of it and it's going to cost you, but it's not the end of the world, just a piquant reminder of why it's wise to Read The Friendly Manual before you embark on a project. At a pinch, it might even count as part of your CPD requirement for the year!

You protected the deposit late so you'll be liable for the usual penalty if your tenant brings an action against you. It's a fact. It's too late to make it better so let's just try not to make it worse. Did you serve the Prescribed Information when you protected the deposit?

If your tenant is two clear months in arrears you have grounds for a Section 8. However, a Section 21 would be harder to argue against, assuming you've got all your ducks in a row with regard to deposit protection, PI, EPC, Gas certificate etc. Am I correct in assuming the original tenancy agreement was for 6 months? Mind you, given that the minimum notice on a Section 21 is two months, there's not a lot in it anyway. I reckon the tail end of February is the soonest you'd be looking at.

As regards the rent arrears, you can still seek to recover those from either party to the tenancy. If your tenant has few assets and little income, it's often not worth pursuing. Again, I'm assuming you don't have a guarantor in place or any rent guarantee insurance. For future reference, they're worth having!

In the meantime, be very wary of doing anything that might be conceived as harassing your tenant (you might want to mug up on the concept of Quiet Enjoyment). Too many visits or even too many phone calls could play the wrong way. "Second home owning amateur landlord solicitor hounds single mum of four kids onto the street in the middle of winter" probably isn't the story-line you had in your head when you got into this business.

You may even find that an hour or two with a property solicitor is worth shelling out for!

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Sarah David 4th December, 2016 @ 22:31

Thanks Simon. Yep, I served the PI and have the EPC, gas certificate etc in order. Yes it was a 6 month fixed term tenancy. We have 3 months of rent arrears now so have text her to ask when a payment would be made. Probably no more than 2 to 3 times a month. Is that viewed as harassment? Are you suggesting we do not try to contact the tenant to settle but simply issue a section 21 notice or section 8 notice? Is obtaining an order under section 8 not quicker?

Thanks in advance

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mr.spacemaker 5th December, 2016 @ 00:28

Hi Sarah,

Tread carefully, I have been in a very similar situation.
When I started the S21 proceedings in court my tenant got legal aid, which she used to bring a counterclaim for late deposit protection.

I've been advised against S8 several times, mainly because it's not guaranteed and there is too much grey area. If I were you I would give the Section 21 notice as soon as possible just as a precaution but as Simon says, you must be absolutely sure that everything is in order, especially with regard to deposit protection and PI.

Prepare yourself for the fact that you will almost certainly have to return the deposit and a 1x sanction (maybe even 3x) and have a serious think about a settlement offer. Hopefully you can find a way to offset the arrears against this if it goes to court, but obviously that will go out of the window if you negotiate a settlement. Your main aim should be to get them out as soon as possible rather than to 'win', as you won't get any money from them anyway...

Good luck, hope you get your house back soon....

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Autumn 5th December, 2016 @ 08:17

Hi Sarah

I am sure that both Simon and Spacemaker are more experienced than me, but it is my understanding that a Section 21 notice cannot be served until after you have returned (and the tenant has accepted) the deposit, in the situation where the landlord did not protect the deposit within the prescribed time.

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Sarah David 5th December, 2016 @ 08:49

Thanks Autumn and Mr. Spacemaker. I understand I will have to pay the penalty and probably 3x given I'm a lawyer and should have known better. I just want the house back. That's my priority. We are trying to settle but they just don't respond to messages and she doesn't like speaking on the phone to anyone. I'm happy to waive the rent arrears, pay back the deposit and give her say 3 months to find a new place. She just doesn't respond and it's so frustrating. I will speak to a lawyer on the section 21 notice Autumn as I'm not sure that you need to return the deposit, I thought it just needed to be protected.

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Sarah David 5th December, 2016 @ 08:52

Mr Spacemaker- out of interest, what penalty did you receive and we're you able to offset the rent arrears?

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Autumn 5th December, 2016 @ 08:57

Sarah, if she's not responding, it could be because she is hoping to be evicted. There are reasons why she might want this to happen:
- because she wants to sue you for unlawful eviction.
- because she can't get social housing if she is deemed to have made herself homeless.
In the second case, if she agrees to any of your proposals she will not get help from the council.

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Sarah David 5th December, 2016 @ 10:52

Thanks Autumn. I'm not sure to be honest. She just had her application for benefits approved so should be able to get a good property. She seems to get quite a bit. She isn't the most proactive of persons or the most Street smart. Her boyfriend used to do everything for her and now I think she is struggling with the whole 'I have to do things by myself now'. I want to be fair as I know she has been left by herself with 4 kids. Her mother even told us that she is quite lazy and slow with things getting things done. We had only liaised with the boyfriend to date and he was brilliant to deal with. That's why we chose them in the first place.

It may just be that we proceed with section 21 notice and take the penalty on the chin. Hopefully, we would be able to set off some of the arrears against the penalty.

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Simon Pambin 5th December, 2016 @ 13:52

It would be preferable to settle any penalty for non-protection out of court. You're in a reasonably strong position in that you're prepared to write off several months' rent (which, realistically, you probably weren't going to get anyway!) in recompense for the failure to protect and it's in your tenant's interests if you "clear" some of the arrears and thus don't go down the Section 8 route at this stage. If she's evicted on a Section 8 for non-payment of rent then the local authority will regard her as having intentionally made herself homeless, which pushes her way down their priority list, whereas with a Section 21 it's more likely to be regarded as all the nasty landlord's fault.

It you haven't already done so, have a read of:
http://www.propertyinvestmentproject.co.uk/blog/tenant-threatening-legal-action-tenancy-deposit/

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Ali 29th December, 2016 @ 21:52

Slightly different query from a landlord , the property I own was let through an agency who wrote up contracts but went bust a couple of years later. Owing lots of money,to lots of landlords this was sorted through the insolvency agency but now we have found out that they actually didn't pay in the tenants deposits , we have been in touch with the insolvency department and the current agency and are getting a bit of a run around and unclear information. Can you please advise as to what to do ? We just want to do what's right for all concerned. Thank you

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mr.spacemaker 16th January, 2017 @ 12:26

@Sarah David

I'll post a proper update of my personal situation soon, but in the meantime, I'd highly recommend that you settle out of court. Unfortunately this will inevitably be an unfair figure, and one you are not comfortable with, but it will be cheaper in the long run as the vast majority of the costs are in the legal fees.

I'd advise against starting the eviction process as this may entitle the tenant to legal aid, which you don't want for obvious reasons.

It's true that if she accepts any settlement that involves her giving up possession it will probably make her ineligible for social housing, BUT this won't really matter if the amount of the settlement is enough to get her into a new property in the private sector.

I would base any settlement on her giving you a valid notice to quit, and I would suggest offering 2x the deposit in return. If this doesn't work then offer 3x or even 4x, with half paid on receipt of the notice to quit, and the rest when she leaves the property.

4x the deposit is likely her best case scenario in court (deposit plus 3x sanction), but she risks having arrears set against this so an out of court settlement will appeal (as will £££), even if she has to agree to give up possession.

Although 4x the deposit is your worst case scenario, it's not as bad as it seems, because you avoid all of the legal costs (especially as you can write the letters yourself) and you also get a notice to quit. If she doesn't leave on the agreed date, the notice to quit should ensure a swift eviction, with no complications.

Good luck!

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Mateo 26th January, 2017 @ 00:56

Dear experts,

My landlord has failed to protect my deposit. Actually I paid the agent, but the agent seems to be dodgy as it is not responding phone calls or e-mails so I contacted my landlord and told him he is responsible for the deposit. The landlord became very upset, denied the responsibility and told me I should chase the agent together with him, as he owes him two rents as well. I insisted and he agreed to pay me back the deposit after I leave the flat, even though he is still denying that it is his responsibility. Due to this he also went back on our verbal agreement four days before the expiration of the lease and said i need to get out of the flat. (i triggered the break clause because I didn't get along with my flatmate and he promised my that i can stay in the flat after the lease ends, he changed his mind though after i insisted about the deposit). After some disputes he agreed to let me stay for another two months but on a higher rent as promised verbally. During our 6 months stay here he has been very negligent landlord, we didn't have heating for a week (it was 15 degrees in the flat), he didnt fixed some minor things as promised and he left some extra oven in the flat even though he promised to take it away. When I talked to him he blamed in on the agent and that he didn't know anything. I really doubt that, but because of how I was being treated all along and especially in the end when i was pressurized, yelled at on the phone, being told that i don't know the UK law I am inclined to seek justice in the court and seek compensation. Am I right to do so? I will still stay in the flat for another two months as we agreed and I want to do it after I move out to avoid more pressure and bullying, is that a smart thing to do? He still hasn't protected the deposit (the old lease ended 5 days ago), should I demand from him to do so or should I ask for it to be returned, even though I am in the flat still but on a different agreement-- the landlord just sent me a confirmation via e-mail and I made the transfer. I quite perplexed on what to do, can you kindly provide me with some advice please?

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Ashley 4th February, 2017 @ 06:46

Hi i am a Tennant moving out as repairs have not been done and landlord and his new letting agent company have not been very nice since i finally said i was going to the council about the repairs. Anyway im now worried they will be funny about my deposit. they have already given a bad ref witch i proved to my new landlord was lies with bank statements . My question is when i first moved in here i had different great letting agent and my deposit was put in a scheme by them but then i got a letter stating that my agent has changed and i got a new tenancy with them but iv had no info about my deposit so does that mean it's not protected anymore with my letting agent and 1 year on how do i get it bk

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Caroline 20th February, 2017 @ 20:52

Could you please tell me if one of the tenants in a joint tenancy who has surrendered early and moved out 3 months ago can still claim compensation from a landlord for not being issued PI during his tenancy? The deposit was protected within the 30 days and the deposit remained in DPS,until the partner who is the lead tenant, and still on the property has used most of it on last months rent. It is now a SPT. Am I liable for sanctions if I reprotect the unused balance of the initial deposit and issue a PI now?
Thanks. Caroline

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Barry 23rd February, 2017 @ 13:58

Hi,

I have had a tenant in for 7 yrs and we recently visited to talk about increasing rent, first time in 7 yrs. She then sent me a letter saying she was going to leave. All fine and she is asking where i put the deposit. Well I only did it literally this week....

Not good I know.

She always paid on time and all was ok but she has now got a bit upset with everything and so have I, she was on a good deal.

Anyway are there instances where landlords are getting fined 3x the deposit?

She is asking me to pay for some repairs she said she had done but we had our own tradesman round and they said the work had never been done. Sounds like fraud to me?

Any info would be great....

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Maria 26th February, 2017 @ 23:59

Hi David.
We failed to secure the deposit within 30 days and to seeve the prescribed information. The deposit was eventually secured but now the former tenant has sent a letter before action requesting the full deposit back and compensation for our non compliance. She was in breech of contract when she left 6 months instead of 1 year into the tenancy and she did not pay the full last month rent. Would we be able to counterclaim for this?

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Adam 1 6th March, 2017 @ 20:51

Which section 8 clause is for property damage?

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mr.spacemaker 18th March, 2017 @ 17:58

@maria

I believe you would need to go to court to counterclaim.

If your former tenant can get you into court (or even close to it) then you will definitely have to repay the deposit and a 1x sanction. You should be able to offset the arrears and get the the breach of contract taken into consideration, but your legal costs will far outweigh any of this.

Your best course of action is negotiation; without involving a solicitor. They will only tell you that you are in a difficult position anyway!

If it's not in dispute that she failed to pay the last month's rent you could offer to return just the deposit, with the 'compensation' being cancellation of those arrears.
I doubt that you will be able to negotiate any better than this if a solicitor is involved on her side.

You could word it something like "If we were to go to court then the maximum you could hope to win would be the deposit and a 1x sanction; but your arrears and breach of contract would be taken into consideration which would significantly reduce this figure. I therefore offer to return your deposit in full and give you compensation of an amount equal to the outstanding arrears"

I think it's important that you return the deposit in full so that they can't try and claim again in the future. Hopefully someone else will be able to give more information on this.

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mr.spacemaker 18th March, 2017 @ 17:59

@Adam 1

Nearly everyone advises against Section 8 eviction as it's so hard to make it stick and too easy for the tenant to dispute. Get some proper advice on your specific case before considering it.

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mr.spacemaker 18th March, 2017 @ 18:36

My problem is finally sorted, and getting my house back cost over £20k in legal costs, arrears, and payment to the tenant. The only thing salvageable in the entire house was the living room floor. Everything else has to be repaired or replaced.....

I settled out of court and paid the tenant to leave within 10 weeks; as it was cheaper than going to court and 'winning'.

I'm posting this in case it helps anyone else....

With the benefit of hindsight, I suspect that this was always the endgame of my tenant.
There were many things over the years that I overlooked which now make sense and also I also now realise that I made a rod for my own back by being too kind, and too relaxed. Here is my advice, particularly relevant if you have a tenant that may look for social housing as they usually NEED to be evicted in order to be eligible.

1. Don't just trust the advice of your letting agent. Make sure you back it up with your own research. Make sure you are familiar with any changes in law that have happened during your tenancy and may affect your case. Particularly the Housing Act 2004, Deregulation Act 2015, and Superstrike.

2. Make sure your tenancy agreement is 100% up to date. If you're using an agent, find out when they last made changes and get them to give you a summary of key points or changes from the last 2 or 3yrs.

3. Make your tenants sign to say that they have received the prescribed information AND the 'information for tenants' leaflet. Many agents work the prescribed information into the tenancy agreement but it doesn't include the 'information for tenants' leaflet; which is an essential part of the prescribed information.

4. Make sure the deposit is protected in time, and make sure that the tenant has confirmed this.

5. Be very organised with repairs and VERY suspicious of any missed appointments for tradesmen; or difficulties in finding a convenient time. I am thinking of writing into my next contract that tenants must allow the letting agent to let tradesmen in if they can't be there in normal working hours.

6. Do not let any arrears build up at all. Explain to your tenant that S21 is a precautionary measure, and you are not planning to evict them, but you have a policy of serving notice as soon as there are arrears, and they can ignore it as soon as they bring the arrears up to date.

7. If your tenant is in receipt of housing benefit, make sure you contact the council at the first hint of a problem and request that the housing benefit be paid directly to you.

8. Don't get hung up on damages - they are the least of your worries. If you end up having to evict then it's likely that the whole deposit will be used up by arrears and there will be nothing left for damages. Just get them out as soon as possible.

9. Don't bother with a section 8 eviction. The scammers are very clued up and will use every trick in the book to get it thrown out (false disrepair claims are a popular scam). Just bite the bullet and go for Section 21 - it will be quicker in the long run.

10. Be prepared to accept defeat. Someone with no money has nothing to lose - they are in a far stronger position than you so unless you have unlimited funds for legal costs; your goal should always be to get your house back as quickly as possible.

Sorry if it's a bit doom and gloom - hopefully some of that advice will prevent you from getting into bother in the first place!!

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Mickey 26th March, 2017 @ 17:50

Hi,
i only found out today that my landlady has only just put my deposit in the DPS on the 15th march this year - my tenancy agreement started on the 7th August 2015, and is stated on the confirmation email from the DPS..
My landlady is now being extremely awkard with me about other stuff- ive had to hound her for gas safety check as there hasnt been one done since i moved in (i now have one as of last week), and my oven has been broke since november last year (i now have a new one)..but apparently this is me being awkward!
is there any way she can still get in trouble for taking so long to deposit my deposit?

Thanks

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Simon Pambin 27th March, 2017 @ 08:29

Hi Mickey,

You have up to six years to sue your landlady. She's still liable to a penalty of one to three times the deposit for failing to protect the deposit within 30 days of receiving it. Exactly how much would be down to the judge: the fact that she did eventually protect the deposit pushes it down a bit, but the fact that she neglected the GSC pushes it up again. Needless to say, it's generally better to wait until you're living somewhere else before you take action, as it will make your relationship with your landlady a bit frosty!

One thing you should be aware of: protecting the deposit and providing a GSC are two things that a landlord must do before a valid Section 21 can be issued, so if your landlady has suddenly done these two things, it may be that she is planning to give you your two months' notice to leave anyway.

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M. Ignacio 27th March, 2017 @ 18:41

Dear Daived

I own a two bedrooms and two bathrooms flat in Brixton, I am renting the rooms separately to two different Lodgers/Tenants, I am still in control of the property paying all the bills (Water, TV licensees, Internet, Phone, Electricity, council tax), and a cleaner that clean all the property including bedrooms and bathrooms every other week. And visiting the property at least once a month.

I didn’t have a contract or deposit protection with any of them, one because I am quite new renting out the property (since June16) due to move with my partner after 4 years relationship and other because I didn’t know that this was an obligation.

My(lodger/tenant)moved out on the 4th of march, and until that day everything was perfect between us, after he moved out, he is asking for the documentation about the protection of his deposit that I didn’t protected.

I had given him his deposit the same day (plus £30 for moving one day before)that I received the keys back, and know he is trying to get a compensation for something that I am not feeling comfortable to agree.

Could you please let me know if this is something that I need to worry about? Could you please help me to understand what I need to do?

Kings regards,

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David 28th March, 2017 @ 13:56

@M. Ignacio

Well the only hope you have is to maintain a story that the person is/was a lodger and that you remained resident.

The bills may help and you might say you slept in the living room.

If there is ANY paperwork that refutes this you are stuffed, so if you gave your tenants an assured shorthold tenancy agreement, or any emails to them that suggested they were more than a lodger.

He will probably seek a statement of truth from the other tenant to say you were not resident. You might say you were travelling and slept in living room but if he has any evidence at all!!??

Otherwise you are looking at a settlement of between 1 and 3 times the deposit as a sanction and you should read this page.

http://www.propertyinvestmentproject.co.uk/blog/tenant-threatening-legal-action-tenancy-deposit/

You have a choice, ignore his request and wait for a legal firm to contact you or you could show your hand and tell him that deposit protection legislation is not applicable for lodgers.

I would do nothing and wait.

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Mark S 28th March, 2017 @ 14:00

Hi Ignacio

Is the house registered as an HMO with the Local Authority?

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M. Ignacio 29th March, 2017 @ 00:38

Hi David /Mark S.

To be honest I don't want to pay him because I fell that I didn't do anything wrong, he had his deposit back. And I treated him very well, I am happy to pay the government or any authority for not protecting his deposit but, why to him? I will wait, thanks David.

Mark S, sorry I am new in this, what is an HMO? So my answer is Not.

Thanks,

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Mark 29th March, 2017 @ 00:46

Hi Ignacio,

Well you will have to pay him, and it is not true that you did not do anything wrong: you did not protect the deposit, as stipulated by the law, you put it into your own pocket, or your bank account--it doesn't matter. Imagine you went bankrupt meanwhile and your tenant would have no way to get back the money--there is a very good reason for this regulation. It is he, that is your tenant, and not the government or any other authority that was at risk by not protecting the deposit.

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M. Ignacio 29th March, 2017 @ 05:13

Mark,

Thanks for your explanation, my point is that his deposit was returned in full, he has lost nothing, and this claim is a clear abuse of statute.

M. i

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David 29th March, 2017 @ 07:41

@M. Ignacio

I am sure that every landlord who made the same mistake feels as you do but the law is the law, I have laid out your choices.

An HMO is a house in multiple occupation, usually it is occupied by at least 3 people, who are not from 1 household/family.

Essentially a house where rooms are let to different tenants usually with locks on their doors and shared kitchen.

If the property is on 3 floors and occupied by 5 people it MUST be licenced, but most London boroughs have their own rules now, some specify certain areas.

They are licenced by the local authority who will want to check fire exits, building materials used and other things.

I suspect Mark S was asking because if you say you live there then you might make the property require a licence.

I think you need to accept you made a mistake and put aside 1 months rent as a potential settlement offer.

If I were that tenant I would be speaking to the other tenant and gathering emails etc that confirmed you broke the law.

BTW by not giving them an AST means that they are subject to a statutory one which probably has more rights than one you might have downloaded from this very website.

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Jonesy 14th April, 2017 @ 00:30

Hi David.

So i have a tenant, been tbere 7yrs. All ok. He is leaving at end of month. I live abroad and didnt put dep in deposit scheme, i did add it recently. He initially sent a letter before action and i paid an amount of half of one times the deposit. To stop court action. Said would pay deposit on leaving as long as house was ok.

Now they have got a no win no fee guy in who wants more money. Asking for 4 times deposit now????

Anyway does first settlement not null and void this latest effort? We agreed it on email.

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David 14th April, 2017 @ 01:58

@Jonesy

I would need to see the correspondence leading up to the agreement and the agreement itself to provide definitive advice.

Generally lawyers use a civil procedure rules know as Part 36,

https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part36

but if no lawyers were involved then there are two things that matter

1. The other party had access to legal advice, i.e. they were able if they wanted to take advice, they were not put in a room and asked to make a decision there and then.

2. The INTENT must be shown.

In an ideal world you would have used the words "full and final settlement" but with emails if there is a series that show the intent is such, you are fine.

If you said something like I am really broke and all I can afford right now is £300 then you might have left the door open to expect more later.

From what you have said so far there would have been a series of emails that would have been the negotiation, one of you proffered a settlement and the other agreed.

I would recommend you see your own Solicitor, but I am confident that you will be able to brush this off, even threaten to sue them for breach of contract and torts to get your legal fees back. To do that you would need to act first so you can make sure it does not go to the small claims track. Sue for £15k+

I would draft a simple letter to the 3rd party saying that the matter has been settled and any further harassment will lead to legal action on your part for breach of contract and torts. You can suggest they reference the following:

Golden Ocean Group Ltd v Sagacor Mining Industries PVT Ltd

http://www.bailii.org/ew/cases/EWCA/Civ/2012/265.html

The no win no fee company is trying it on, send them something along the lines of the letter below, please note this does not constitute legal advice and you should take such advice from your own solicitor.

========

Dear Sir/Madam

I write regarding your recent demand reference XYZ123.

It seems that your client failed to inform you that we already agreed a full and final settlement of this matter. The terms of that agreement were as follows:

1. I paid your client the amount of £nnn.nn

2. The deposit was protected in an approved scheme

3. The deposit would be returned at the end of the tenancy subject to the performance of the tenancy agreement (based on the condition of the property and any arrears), any dispute of monies withheld can be adjudicated by the deposit holding company (DPS/TDS/MyDeposits) or by bringing the matter before a Court.

Please note that I consider your demand vexatious and without merit, I have been advised that there is case law on the validity of our agreement:

Golden Ocean Group Ltd v Sagacor Mining Industries PVT Ltd

I am a very busy person and dealing with your vexatious claim wastes my valuable time. I therefore reserve the right to claim the sum of £250 per letter received and responded to in regard to this matter, in addition to my legal costs.

Any further threats will result in me handing this matter to my solicitors and me taking proceedings against your client for Breach of Contract, Torts and my costs in this matter, I estimate this will exceed £15,000.

Meanwhile, I would be grateful if you would kindly provide me with the name of the firm of solicitors you represent in order that I make a complaint about your conduct to the SRA.

Yours Faithfully

Jones E Y

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Lisa 21st April, 2017 @ 10:36

If I issue a new tenancy agreement at the end of the current one and put the deposit into a scheme at that time, would that solve the problem I did not do it originally?

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Simon Pambin 21st April, 2017 @ 13:08

Hi Lisa,

No, that won't solve the problem: you didn't protect the deposit within 30 days so you're liable if your tenant brings a claim against you. Protecting it (and issuing the prescribed information) as soon as you became aware of the problem should reduce the amount a judge would award, but that would be the case whether you issue a new tenancy agreement or not.

The only potential advantage of issuing a new tenancy agreement is that it might provide a bit of a sneaky disguise for handing over the Prescribed Information!

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David 21st April, 2017 @ 14:35

@Lisa Your tenant has 3 years to make a claim.

It is better you secure it at the soonest possible moment.

The Dep Co will contact the Tenant to let them know it has been protected

One way to "prepare" a tenant for this is to say that you are changing Dep Co from insurance based to Custodial so they should hear from the deposit co.

You will also need to issue PI again, late but it does at least show willing.

Then you just have to wait and see.

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Lisa 21st April, 2017 @ 20:32

Thanks for your help Simon and David

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Mike 24th April, 2017 @ 09:35

Hi,

I have tenants in my property for 18 months, who have paid their rent on time, they told me when I last renewed their contract that they were looking to leave after this current 6months rental, as they were having their 3rd child and needed a bigger property.

I gave them written notice 2 months before their agreement was up and now they won't leave as they couldn't find another suitable property and have said they want to get social housing and to issue them with a section 21.

However, after reading up on section 21, which I haven't done as yet, I have realised I did not place their deposit in the required protection and because Of this I will gave problems!!! Please could anybody offer any advise as to what to do next? If I put the deposit into the scheme now before inissue the section 21 will this count.

Thank you

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David 24th April, 2017 @ 11:34

@Mike

Hi

I am afraid it does not "count" but you need to get it done ASAP or some would suggest you return the deposit, but that would assume you were happy there were not going to be any damages.

The longer the period between you protecting and them leaving the better, so if you are going to do it then do it today.

You did not say the timescales, if it was under 2 months I would return it to them in the hope that they are ignorant of the law and remain so for the next three years although potentially they could claim on other grounds. For example if they do not become aware of deposit legislation till they move to next property or one after etc.

As above post you could say you are moving their deposit to a different deposit company to prepare them for the SMS and certificate they will get in post.

You also need to issue them with PI (Prescribed Information), both of these needed to be done within 30 days.

You also needed to issue them with "How to rent" booklet, an Energy Performance Certificate and a Gas Safety Certificate.

What I do not understand is why you are issuing S21 when they say they are leaving.

You could just let them go, have an inspection a month before and give them their deposit at that time to facilitate their move to new place.

If they asked you to issue S21 because they want to Council to house them then the first thing the Council will want to do is check legal validity of S21. They do this to delay delay delay their obligations. In which case you are better to comply with the S21, PI, How to Rent, EPC, Gas Cert etc.

You will be able to negotiate the sanction, probably down to 1x rent as discussed here

http://www.propertyinvestmentproject.co.uk/blog/tenant-threatening-legal-action-tenancy-deposit/

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David 24th April, 2017 @ 11:36

Sorry re-read your post as did not see the social housing bit, so you are best to just register it and be done with, do it YESTERDAY.

You will still be able to negotiate.

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Mike 25th April, 2017 @ 05:30

Thanks David for your comments, you have answered my question.

Just one more thing, there are two types of insurance TDS and TDS Custodial if I used the TDS is this legally regarded the same protection as the TDS Custidial, if issuing a Section 21?

Thank You

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David 25th April, 2017 @ 09:21

Legally, yes they are both the same, the insurance protection is underwritten by TDS for a fee. Dodgy Lettings Agents use them and then keep the money as cashflow, then they slowly go out of business, the TDS kicks them off the scheme and the Landlord is then liable for not protecting the deposit from that moment even though they had no idea.

The deposit companies make money on interest with the custodial system, not sure if they require a minimum period of 6 months as that is the minimum AST.

You will have to ask them about terms.

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Lisa 25th April, 2017 @ 18:37

David you mentioned the tenant has 3 years to make a claim

3 years from when?

When I set up the scheme or when they move out? As they are happy tenents and could say for a long time

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David 25th April, 2017 @ 19:47

Officially it is 3 years from when they discover it but there have been some who have found other way and done it within 6 years when most things are barred by statute.

Yep and there is the rub, Tenants and Landlords love each other when they need each other but once they have gone their separate ways the landlords don't bother with the nice reference and the tenant is told by someone in the pub that it is easy money.

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Mike 26th April, 2017 @ 20:09

Hi David, thanks for reply ref the deposit protection what if I tell them if asked I've drew the deposit out to give back to them the social housing have contacted me asking me to issue a section 21 what's your advice on this any easy options out.

Thanks

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David 26th April, 2017 @ 20:30

Before the law was changed (about 8 times) Landlords could get out of it by giving the deposit back, some would even call for an adjournment in Court, give the tenant cash and then go back in saying they held no deposit.

Now you are liable if you did not protect a deposit within 30 days of taking it and if you do not issue PI within 30 days.

From Oct 2015 (which seems to fit your timeline) they added the obligation to issue Energy Performance, Gas Safety and How to Rent, including giving them the latest How to rent if it was updated since you renewed.

If you live in what we might call a "sensible Council" area, they will tell the tenant to leave when the S21 expires and they will take then into temporary housing on that day.

If you live in an arsehole Council area, they will pull out ALL the stops to delay delay delay, they will tell you to issue a S21, tell the tenant to challenge it 2 months later because it is not legal (if no EPC etc), you would then be forced to start over, another 2 months and then when S21 expires they tell them to stay put and force you to get bailiffs, that could delay for weeks or even months. If they have kids and are vulnerable you may struggle to get it taken to high court which would cost you a packet anyway.

During this time if they stopped paying rent which some do then you are entitled to get it paid direct after 6 weeks.

So you will have to figure out the best way forward, as I said above giving it back to them does prevent the paperwork and they may appreciate it, but it will not get you off the hook.

----
Please note that this for information purposes only and should not be construed as legal advice. For legal advice please contact your own solicitor.

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Linda 5th May, 2017 @ 20:57

My tenant is asking for proof of where I have her deposit. It's a really long story but in short I paid her deposit back to her account as I thought she must of heard about this dps and was trying to see if I had a dps scheme in place. (I didn't protect the deposit but I have it in an account) she then sent it straight back to me and is still asking for my certificate. I have now put it in a dps scheme but do you think it's to late for me?

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David 5th May, 2017 @ 21:12

How did she send it back?

You do not give any dates or periods, considering that there are at least 8 different variables affected by dates, acts and case law I can't be precise

Suffice to say you are liable, liable to agree a settlement

The fact that she sent it back clearly shows she is after a payday.

She should have a certificate from the DPS if you have now given them her details

Wait for her to actually make a demand

While you are waiting have a read of this page

http://www.propertyinvestmentproject.co.uk/blog/tenant-threatening-legal-action-tenancy-deposit/

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Anon 8th May, 2017 @ 20:41

I quote "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."

This is NOT TRUE. There is NO recourse if your letting agent fails to protect your deposit. NONE. Not even if they belong to a redress scheme like ours did. A potential fine is not a loss - so you will not get redress unless, miraculously your dodgy letting agent stays in business until you get sued for up to 6 years. You cannot admit your fault either, as according to legal advice that is you causing your own loss.

Ours went out of business, the Property Redress Scheme offered us £200 to compensate us for lack of deposit protection. That is not going to cover the 1 - 3x the deposit. Bottom line is, do the deposit yourself or don't take one. If you rely on someone else and they mess up it will cost you, not them.

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Turnyourtvoff 11th May, 2017 @ 14:22

Good afternoon,

We are looking to claim back unpaid rent £1000-£1500.

The tenant has admitted he owes money in the past and even started paying through a payment plan. He has now decided to stop paying and does not wish to make further payments.
We have the signed tenancy agreement, the tenant has now vacated the property (not leaving the required notice for termination).

Our main question is can we send a letter before action (LBA) to his employment (work) address as currently we don't have a current address for him?

Another point is, the depoist (less than 500 pounds) was not in a deposit scheme. We are not and have never said we would make any deductions (even though the tenant did damage a door - of which we have proof) so are willing to transfer the whole amount back as soon as we initiate proceedings to avoid being in breach of the e Section Housing Act 2004 and avoid the compesation fine of 1 to 3 times the deposit.

Does anyone have experience in any of these points?

Thank you in advance

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Simon Pambin 11th May, 2017 @ 17:34

You'll still be liable for a penalty, even if you pay the deposit back now, because you didn't protect it within 30 days. Given the sums involved, you might find it easier just to come to an agreement with your erstwhile tenant whereby you keep the deposit and write off the remainder of the debt, and he doesn't sue you for breach of S213.

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Turnyourtvoff 12th May, 2017 @ 14:21

Thank you for your reply.

As for the sending the money back, that was information given by my solicitor and that would avoid the compensation being the 2x 3x the deposit amount which I believe is reserved for cases when the court deems the landlord has been unfair and is trying to overcharge the tenant.

The only reason we still have the deposit is because the tenant on leaving told us, that as he was significantly behind on payments we could keep it and put it towards his bill. (We have proof of this)

Concerning the legal bill, I am affraid you have just reiterated my concerns.

Does anyone know if/why the tenant would be able to make us liable for his solicitors fees regarding the 1)case non protection of deposit in a scheme yet we would not be able to charge solicitor fees for the 2) case of no- payment of rent?

I belive he would only be liable for cort fees etc which are significantly less.

Any more comments or expertise would be appreciated,

Thank you

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David 12th May, 2017 @ 20:31

@Turnyourtvoff

Technically you can serve him at any address you have reason to believe he is at, it is frowned upon to use work address, but if done discreetly, marked strictly private and confidential for the attention of addressee only. Hand delivery may be a better option or just follow him from work and figure out new address. You may be able to trace him using the same people who do high court enforcement.

HOWEVER, you really risk this turning around and biting you in the arse.

You have been given bad advice about the deposit, the mitigation has all but gone because you did not protect it as soon as you became aware. The Judges do not give greater sanction because you overcharge, most are just concerned with the law. The decide what kind of a Landlord you are by your record, No Repairs issues, no entering the property without notice, no attempted eviction, proper gas safety checks, EPC and How to rent booklet, plus the PI. They are human, so if they see a tenant who has arrears, damages the property, has ASB issues etc etc.

You can only hold the tenant liable for loss of rent between the time they left and the time it took you to get a new tenant in (OFT356 actual costs). You have to mitigate your losses as we all do.

You can indeed be held liable for costs depending on the track used, small claims has limits which is why we avoid using it when making such a claim. If you are in any doubt, I have had one case which was appealed, things got serious and one side brought in a very expensive Counsel. Not only were his travelling expenses £700 for the day but the whole of the legal costs from both stages were allowed, it was £8k in legal fees.

Court is a playground for he wealthy which is why I always suggest what Simon rightly told you, SETTLE SETTLE SETTLE.

Your tenant has 3 years from becoming aware of your obligation to protect to bring a claim but it can be up to 6 years, do you really want that hanging over your head?

If he is on benefits his fees to kick this off will be reduced, he then gets lawyer to carry it on. The thing is you have no defence, unless you can show you did indeed protect it and have evidence from deposit company you are guilty.

The only issue for the judge is mitigation, ignorance is no excuse, they may accept a little if this was your only property and this was the first time you had rented. However, not only did you fail to protect the deposit within 30 days but you failed to provide the Prescribed information, that usually guarantees you a 2x unless you had further mitigation, for example you had an agent and they told you they had protected the deposit. Even that does not get you off the hook, it MIGHT get you a reduction but it depends on the Judge you get on the day. It also depends on your conduct, if you did not have Gas Safety or there were other issues, then you are done. Also bear in mind that this applies PER TENANCY for an old tenancies until Oct 2018.

So what you need to do is play P O K E R, you prepare a case to sue him for breach of contract and your costs plus any rent arrears. You come up with some fictional number plus estimated legal fees of say £3k. You then offer the olive branch saying you wish to avoid animosity and come up with an out of Court settlement which will avoid a CCJ against him.

You draw up the agreement, saying he agrees to you keeping the deposit, agrees to a net amount to be repaid at £20 per week and agrees that this is in full and final settlement of all legal matters relating to the tenancy including any sanctions under the Housing Act. Any such action at any time to void this agreement and make the full claim payable on demand. Get your solicitor to draft it.

Do NOT be greedy here, take his arrears to the day he left, your actual costs in replacing him, if you use an agent you cannot charge for the ongoing agency fee because he could argue you would pay that anyway. Any deductions due to property damage or carpet cleaning if it was in tenancy agreement. Then give him a discount for the settlement. Ideally it should be worth 2x rent on paper (plus he avoids the legal fees) so there is no incentive for him to go to Court and risk losing. Some Judges will go a bit easier on a Landlord on Sanctions if the Landlord brings the case and the tenant bring the sanction claim, but again it all depends on the Judge on the day. Giving him an opportunity to settle will also look good if you do go to Court.

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