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 landlords 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.

If you’re a tenant that’s trying to figure out what your rights are because you suspect your landlord hasn’t protected your deposit, you’re also marginally in the right place. But bear in mind, I’ve written this blog post from the perspective of a landlord, so you may need to backward-engineer the information so it’s relevant to you. Alternatively, you can just jump over to my tenant deposit guide for tenants :)

Brief reminder of what is required to comply with the Tenancy Deposit Legislation

To be in compliant 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 is presumably the vast majority of landlords).

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! HELP!

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 you can’t serve a valid Section 21, and your only option is, possibly, serving a Section 8 Notice where you must prove grounds for eviction (which you may not 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.

    Suggestion: just come clean, say you didn’t follow the proper procedures and you’re trying to rectify the situation. Don’t mention the entitled compensation.

  • If you’re trying to get rid of a rogue tenant and you have grounds for eviction (e.g. your tenant is in 2 months rent arrears), serve a Section 8 (as already covered, unlike with a Section 21, you don’t need to comply with the tenancy deposit legislation in order to serve a Section 8.
  • 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 over by how the deposit has been handled (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 its of any consolation (which it probably won’t be), the law was specifically changed in the Housing Act 2004 to allow tenants to sue the agent as well as the landlord for the penalty for non compliance of protecting the tenancy deposit.

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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707 Comments- Join The Conversation...

Showing 657 - 707 comments (out of 707)
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Benji 18th October, 2018 @ 14:35

@The Landlord,

Only when you fecked up and made schoolboy errors.
You made some real howlers in the early days! Not so many now though, obviously learning.
Speaking of which, how about changing this incorrect post about ground 1 that caused David to fuck up on;

www.propertyinvestmentproject.co.uk/blog/section-8-evicting-tenants/

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The Landlord Avatar
The Landlord 18th October, 2018 @ 15:01

@Benji
A lot of your issues were on subjective issues!! Stop bullying!

It's on my to-do list, don't worry! I need to reword it so it's easier to digest for Joe Bloggs.

When I Googled around, a lot of other resources have Ground 1 described similar to what I have.

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Benji 18th October, 2018 @ 19:13

It's on my to-do list, don't worry!

Thanks.
To my (and your?) huge surprise Propertyinvestmentproject is now taken as a serious landlord resource.

I need to reword it so it's easier to digest for Joe Bloggs.

Stop bullying David!!

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Ruth 19th October, 2018 @ 03:18

Hi David

Thank you for all your useful advise on here. I am a landlord and I have two properties where I did not protect the deposit due to not getting clued up with the right info.

First property
I rented it to a tenant with a council backed deposit bond but as a safeguard, decided to take an additional one month in advance as he failed his references. I only just found out yesterday that the one month advance rent will be treated as a deposit. Oh my goodness! What are my options? I am ready to return his deposit to him if I need to as I have the bond to call upon if needed. Alterrnatively, I can choose not to renew the council bond for the new tenancy year and perhaps now treat the money as a deposit and protect it (explaining that I am now protecting the deposit due to Council bond not renewed). What are my best options? Kindly advise.

Second property
I took the tenants through an agent in 2012/2013 but the deposit wasn't protected. I really want to get these tenants out as they have not used the property well and do not pay their full rent so owing so much over the years. As they are claiming housing benefit, there is a shortfall which they pay when they feel like. Amount owed will be close to £4-5k if not more over the years. The rent is £1200 although I had tried to negotiate with them so the rent paid can be at least £1000 per month. I have not been able to serve a section 21 as the deposit hasn't been protected. I had mentioned to them previously that if happy to use their £1000 deposit (rent amount at start of tenancy) to cover some of the shortfall but got no concrete response.
What are my options with these tenant? It might be worth adding that the council benefit paid is on the basis that the tenant is a single mother with her three children. I am aware though that the husband fully lives at the property and works full time so I am not sure why they are not reporting this and pay the shortfall too.

Look forward to your kind response and advise of options to take.

Thank you!

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Eric 19th November, 2018 @ 15:46

@David

Hi David,

My landlord hasn`t protected the deposit. I have paid always on time and the flat is in perfect condition. I dont want to take legal action against him but i am thinking not to pay for the last 6 weeks in the flat as i am moving out. Is this legally okay please?

Thank you

Eric

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David 19th November, 2018 @ 19:13

@Eric

Sorry but that is definitely NOT OK as you signed a legally binding contract to pay rent.

You can negotiate a settlement with your Landlord but I would not suggest you do that until you have left the property and they have returned your deposit with no allegation of damages as some Landlords invent damages to reduced their obligation. They do not realise that as a statutory penalty it cannot be offset and they need to bring a separate claim for damages and breach of contract, paying the appropriate fee.

I would be pleased to help you and your Landlord come to a mutually acceptable agreement without the need for legal or court fees, please contact me via the forum. Once you register, you can click on this link to private message me: http://bit.ly/davidpip

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David 19th November, 2018 @ 19:45

@Ruth

Sorry I did not see your message until today.

First property

A lot of Landlords have fallen into this trap of asking for a higher deposit and not realised that it will be counted as a security on the rent, thus a deposit.

I am wondering whether as this is a Council Tenant they may be on Housing Benefit or Universal Credit with rent being paid direct to you?

If so you write a letter saying that the advanced rent they paid means that they are actually ahead in their rent payment so you are returning the advanced rent, do not refer to it as a deposit.

If they pay you rent directly then simply change the letter to say that they do not need to pay the next rent payment as they are ahead in their rent payments.

If you are lucky it may not be brought up, but paying it back does not get you off the hook.

One way to obscure it is to say that you have done your audit for your accounts and notice that they have been overpaying their rent and that you took the first two months upfront expecting them to start paying rent monthly for month three onwards. Obviously do not do this if any emails or texts contradict this.

I would stick with the Council bond because it does not draw attention to it not being protected.

Second property

Sadly it is poor performing tenants who will be most likely to make a claim.

If the Rent is £1200 in the contract it is £1200.

Now legally you have the obligation of between 1x and 3x the deposit for EACH tenancy (do not give the details here as it may identify you). However, you have some leverage for a settlement if it is used properly, because they will probably want the Council to put them in Social Housing.

The problem for them is that if they leave of their own accord the Council will deem them as intentionally homeless.

Housing Benefit is paid based on need and income, not on whether they got back together, in fact it is his return that has probably caused the Council to pay less as they will take his income into account. If they have not told the Council that he is back then that again gives you some leverage.

You can and should protect the deposit immediately, if you do not want to draw attention to it then say that you are moving it to a new company because they offer a free service (DPS custodial is free, insurance based is not). Protecting the deposit rectifies the fault and you may then issue a S21 with a copy of the latest "how to rent" doc, I am assuming there were no failures on Gas Safety certificates?

If there were any other issues there is always Section 8 and using this is better anyway as you can claim your arrears. I can help you with this.

If your Agent had a full service agreement with you and their website does or did say they took care of all your legal obligations I can help you get them to pay the sanctions and wrap it up in a settlement agreement with the tenant.

To be honest you are unlikely to get any allowance for not protecting a deposit from a Court because of arrears, it is better to plead mitigation of being novice Landlord, blame the agent or suggest confusion was caused by the agent.

If they report the Shortfall the Council will deem them as intentionally homeless and may refuse to put them on list until the arrears are cleared but they still have a duty to the children so will probably put them in temp accommodation or use their private landlord scheme to house them (varies by area).

I use a mediator who may be prepared to help you in this matter without charge if the Tenants will engage.

If you send me a PM via the forum I can give you more advice about how to proceed.

The details of how to contact me via the forum are above in post 663

Again sorry for the delay.

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christine 22nd November, 2018 @ 18:12

Hi, I have just found out today that my landlord has failed to put my deposit in to a tenancy deposit scheme. We paid the deposit on the day our tenancy started by card to an estate agent who then passed it on to our landlord who said they were going to secure our deposit themselves. We have since been in the property 4 months and not received any information on the deposit scheme. I contacted the agent today and they called the landlady who said she hadnt protected it and would do so.A couple of hours later and its in the scheme. My question is she has failed to do so within the 30 days and i think acted so quickly because the agents advised her she had broken the terms of the contract. Is she now liable if we take her to court over this? We have paid our rent on time every month via bacs so have proof and have looked after the property. she hasn't been very forthcoming with repairs needed to the property and has insinuated that an issue with shower drainage is our fault even tho we have documented evidence she was aware of this with the previous tenant. Can any of this impact our chances in court? Thanks

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Paul 22nd November, 2018 @ 21:21

First AST: Jun 2014 until Sept 2015: deposit was paid into DST, and was returned to us in early October 2015.

The first AST rolled over into a periodic tenancy until Jan 2017. The LL had no deposit at this time.

Second AST: Feb 2017 to Oct 2018: we signed a new AST for the same house, same parties, just £50 more in rent. The AST expressly said that the deposit had to be protected... but it wasn't.

We are now somewhere else (still waiting to get the full deposit back, though) and wondering whether we can actually claim up to 3 times the deposit amount, or the Dereg Act 2015 applies to us.

As we started a new tenancy, and LL didn't protect it, I think we can ask them for compensation, but query whether the Dereg Act 2015 may have changed everything.

Your help is very much appreciated!

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David 22nd November, 2018 @ 23:49

@christine

Yes she is in breach of Deposit Protection regulations for not protecting withing 30 days of the deposit being taken but also for not serving you the Prescribed Information. However, there is no hurry as you have 6 years to make a claim but also you may want to think things through.

At this stage you are 4 months into a 6 or maybe 12 month agreement, the shower notwithstanding you may find that this is a great place to live and things improve or you may decide you want to leave ASAP.

So if you want to leave you may not want a claim to create bad blood and potentially fake damage claims when you move out and also the potential of a bad reference to spite you.

If you want to stay and have an initial 6 month tenancy and a new tenancy is signed after the 6 months for say a further 6 months but she still fails to serve the PI, then the gravity of the first failure is increased to perhaps 2x or 3x and a second set of sanctions arises for the second tenancy because the regulations for the first tenancy have not been fully complied with (no PI).

Now to her credit she has mitigated her failure by protecting as soon as possible so if you made a claim right now she would likely get a 1x sanction as a slap on the wrist.

I can fully understand why it made you nervous but now your deposit is protected, you can log into the website of the deposit protection company assuming they have sent you a text or email.

So for now I would hang tight, see if your relationship improves, do not mention the deposit and if asked verbally say thanks for sorting it out.

You may find when you leave she leaves you a glowing reference, gives you back your deposit with no claim of damages and you decide that it is not worth pursuing the claim.

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David 23rd November, 2018 @ 00:54

@Paul

The tenancy details seem a bit vague here; usually tenancies are for 6 months or 12 months to start, you say first tenancy went SPT until Jan 2017 but you do not say when it actually expired or why the deposit was returned in October 2015, some 14 months later.

Assuming that First AST was an 12 month contract there would be no liability for that tenancy as long as the Prescribed Information was served. The PI is supposed to tell you all the FULL details about where the deposit was protected :

https://www.legislation.gov.uk/uksi/2007/797/article/2/made

There is no DST, there is TDS, DPS or MyDeposits.

The deposit needs to have been protected for the whole time, so if an agent protected it for say 6 months but the agent was fired and ended their protection, then sanctions for that deposit would arise.

So let us assume that it was a 12 month contract and the tenancy went SPT in June 2015, the deposit was still protected but at that time Superstrike would have applied to that SPT and a new PI would have needed to be served WITHIN 30 DAYS. A failure of this sort is only likely to get a 1x sanction.

You say the deposit was returned to you in Oct 2015, that does not undo the PI failure of tenancy1 but likely to be only a 1x sanction as the deposit was protected or returned to you.

Strictly speaking the SPT was tenancy2 and the Feb 2017 to Oct 2018 would tenancy3 and maybe tenancy4 if the Feb 2017 contract was not a contractual periodic tenancy.

You say "The LL had no deposit at this time" but you do not explicitly say whether you paid a new deposit in Feb 2017 or whether it was protected?

For the record, it does not matter whether an AST says a deposit needs to be protected, if a deposit is taken it needs to be protected.

As you are saying you are still waiting to get the "full deposit" back, I am assuming that you paid another deposit in Feb 2017 but there may have been some deductions for damages or unpaid rent or the deposit may have been protected and you may be waiting for the scheme administrator to return the deposit?

Again the same question arises about dates; Feb 2017 to Oct 2018 is an unusual period. So was it 12 months that went SPT or was it a contractual periodic tenancy that never expires and continues until terminated according to terms of the contract?

If it was a 12 month contract that went SPT in Feb 2018, then that would be tenancy3 and tenancy4 would be the SPT from Feb 2017 to Oct 2018.

I do not wish to appear facetious, but you say the deposit was returned but say it was not protected for tenancy3 or tenancy4, so I am going to assume you paid a new deposit in Feb 2017 and it was not protected.

The way the Deregulation act works is that if you protect the first tenancy and CONTINUE to provide protection for the duration of all tenancies thereafter then there is no need to re-protect the deposit. This effectively reverses the Superstrike Judgement where new PI had to be served and the deposit was deemed as being taken again (virtually).

The most important issue here is continuous protection, so I would need to know the Term of each tenancy (how long it was written to last for).

A failure of continuous protection or failure to follow all regulations means there is no get out of jail free card for subsequent tenancies.

The Dereg Act 2015 now applies to all tenancies.

It is going to depend on where there were failures, whether the failures were considered severe or minor.

If that first tenancy was protected but no PI was served that is deemed as being as bad as no protection because you had no idea how to dispute a claim on it has one arisen.

The return of the first deposit would mitigate that PI failure (if there was one) or cease the requirement for protection thereafter if PI had been served in accordance with the Act.

If the 3rd contract did go SPT and remained unprotected then that would be between 1x and 3x failure for tenancy3 and tenancy4 (if it did go SPT as I suspect rather than be continuous).

I can help you write a letter of claim if you contact be via the forum and I will take a look at each of the agreements to make sure all is done right.

Really all the Dereg Act 2015 did was to stop the foolish need for a Landlord to "re-protect" a deposit and serve new PI for any subsequent tenancies for what was substantially the same property to the same parties.

The Superstrike regulations confused the hell out of Landlords, even though the deposit was still held in schemes Landlords thought they had to pay it back and then have the tenant repay it again, when in fact the law deemed it as having been returned and repaid, so all that was required was the reserving of PI and Dereg Act 2015 stopped that PI re-serve obligation.

As this is a live case it is probably best you contact me via the forum to avoid prejudicing yourself as you have already provided dates that may identify you.

Instructions for contacting me are in post 663 above.

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Paul 23rd November, 2018 @ 09:43

@David

Thanks. Below the points you requested.

T1 was for 16 months: Jun 2014 to Sept 2015. Deposit for T1 was protected for the whole term of T1, plus PI was served.

Not entirely sure why LL did not ask for the deposit to be returned to her for T2. I think deposit was returned to me because the LL did not want to pay the agent £400 to change dates on a new AST, so the LL and I took the matter directly. Anyway, from Oct 2015 T1 went into a PST (i.e. T2).

T2 was a PST and lasted until Jan 2017 when the LL wanted a new AST, with increased rent and new deposit to be paid. So we got a new AST, for 24 months (T3).

T3 is the one where I paid a new, fresh deposit to the LL, and where the LL did not protect it, nor served us the PI. T3 ended in Oct 2018 as we gave notice to the LL.

Failure was on the LL to protect the new, fresh deposit for T3, so I wonder whether we can claim for the unprotected deposit for T3. You said that the Dereg Act 2015 applies if there is a continuous protection of the deposit, but in our case the deposit was returned, so there was no continuity, and I could claim up to 3x the deposit amount paid for T3.

Thanks

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David 23rd November, 2018 @ 18:49

@Paul

I did suggest not putting more information on your dates on here and to use the forum.

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Looper 13th December, 2018 @ 12:25

Hello,

Does lack of deposit protection and prescribed information also prevent a section 8 being issued, or only a section 21?

Can anyone confirm if there´s anything that does prevent a section 8 being issued? (which is on grounds of ground 12, breaching term of agreement).

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The Landlord Avatar
The Landlord 13th December, 2018 @ 12:33

@Looper
The deposit legislation doesn't affect your right to serve a section 8.

Nothing can prevent a landlord from serving a section 8, but of course, that doesn't mean your grounds for eviction will be agreed upon by court (if it gets that far).

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David 13th December, 2018 @ 13:26

@Looper

It is not supposed to but I have an ongoing case where the Judge suspended S8 to allow a Counter claim for deposit protection failure.

Had they had a Solicitor been present it would probably not have happened, Deposit Protection is a Statutory Sanction and cannot be offset so does not affect arrears (in this case), also it does not stop a S8 but these things happen. It is also possible that when you issue the notice they will issue the Part56 claim which is on the Part8 track and they then ask for them both to be heard together.

With S8 a Judge will always consider the hardship impact to the person being evicted, the term remaining on the agreement and break clauses. If for example you had a break clause at 6 months and you were 2 months into the tenancy I can't imagine you will be successful.

G12 is discretionary but also has to be pretty strong breach in my experience, usually needs several grounds if you wish to be successful.

A Judge would take a breach such as antisocial behaviour (assuming there are terms) more seriously than say not cleaning the property (assuming there are terms).

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Desperate Joanna 14th December, 2018 @ 16:08

Please help with two urgent questions:

Back in January, I sent my landlords the signed AST to countersign. They said they posted it back (I have text messages saying they did so) but I have never received it.
I paid rent and the deposit to them in accordance with the terms of the written AST, and also gave notice when I left, in accordance with the AST. Do I have an AST?

I have not left after 6 months and recently discovered that the landlords didn't protect my deposit. I want to sue them, but I am not sure I effectively have an AST, which I understand is necessary to claim compensation.

Also, as the AST has now ended, can I nevertheless use the notice details included in the AST? This is the address of just one of the two landlords, at the home address of the other one. If I send a letter before action there, will this be served properly on both? I don't know the address of the other one, and I am very concerned.

A desperate tenant,

Jo

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David 14th December, 2018 @ 19:56

@Desperate Joanna

I presume you live in an self contained property or HMO and were not a Lodger.

If so, then regardless of whether your Landlord gave you an AST you have a legal tenancy, if you or they have a copy of the proposed tenancy then the terms of said tenancy apply, otherwise an type of AST called a Statutory Periodic Tenancy is created by Law.

The obligation to protect a deposit is determined by taking a deposit in connection with an AST, so the liability was created.

I would be happy to help you bring the claim or reach a settlement with your Landlords.

If you have a copy of the AST you can seek sanctions for up to 3x the deposit for it and the second tenancy that was created when the first one expired.

I can help you get the address of the Landlords.

It is probably best not to discuss your live case further on an open forum.

If you send me a PM via the forum I can give you more advice about how to proceed.

The details of how to contact me via the forum are above in post 663

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David 20th December, 2018 @ 14:12

Hi

I had a tenant for three years in a property, it was my first time being a landlord. I registered for a DPS account but somehow never filled out the specific deposit correctly so I was never correctly protected when I was genuinely under the assumption it was.

I gave the tenant reduced rates for the first few month as they were waiting for their partner to move in with them. I didn't increase their rent through out the whole duration. They decided to move to a bigger place and I returned the deposit in full, even though I could have pulled them up on certain damages.

A year after they more than amicably moved out, they have discovered my mistake and are threatening legal action to make a quick buck as they have suffered no negative impact.

I more than understand I am in the wrong and am willing to make a settlement, but what is considered a reasonable offer. 1/4, 1/2 or the whole deposit.

Thanks, David

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David 20th December, 2018 @ 22:50

Hi David

You are very lucky to have caught it early, i.e. before they contact a Solicitor or Claim firm.

As a novice Landlord you have some mitigation and there does not seem to be anything they can drag up to paint you as a rogue landlord (e.g. failure to get gas safety every year).

So in accordance with case law a Judge us completely entitled to award what they see fit which may be 1x, but with three years you have to consider how many tenancies there were. If you had one every six months that would be a lot of tenancies but if you had say a year and then went SPT that would be 2 tenancies.

The metric for a settlement can be what they would get in Court, it can be that plus what it would cost you to defend and/or their own legal costs. However, there are a lot of holes they can fall in, even some Claims companies make errors. Also bear in mind that they lose 35% of the sanction if the Claims company or Solicitor, so if they got 1x they would be better off seeking a settlement.

Also when considering a settlement the amount of the deposit might dictate the amount you would settle at, for example if you took £2500 as a deposit you would be loath to offer 25% but if your deposit was £500 you might well offer £300.

If you are dealing with them and not a claims company or Solicitor, you can start a bit low in the knowledge that they will push back and you will probably meet in the middle.

If a Solicitor or Claims company are involved you do not want to enter into protracted negotiation because they charge you to argue. Instead contact me via the forum and I will do a letter for you which uses a different approach.

If you are still dealing the the tenant the blog post below gives some suggestions for negotiation.

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

The details of how to contact me via the forum are above in post 663, I am working on a lot of cases at the moment so would reply to you immediately but not be able to do any case work until first week of January. If the case is as simple as you suggest then it will not take long.

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Sue 21st January, 2019 @ 01:51

I had tenants move in on February 2014 it was a six month contract then extended from August 2014 for one year I forgot to protect the deposit I put it into scheme on August 2014 now tenants moved out they are sueing through Solictor can they need advice what was the time limit back then

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David 21st January, 2019 @ 09:55

Hi Sue

Yes they are quite within rights to take legal action.

The number of claims will be determined on how the tenancy was "extended" and when the tenants left. For example if a tenant moves in

January 2017 for 6 months and then signs a new AST
July 2017 for 12 months and then leaves on
October 2017.

That would be three tenancies

The law in place at the time does not matter because you are liable under all of them.

It sounds as if you have been approached by a claims company who have used one of their panel Solicitors to send a letter before action.

As you have a live case I would not advise discussing further here on this open blog, I can help you reach a settlement if you wish to contact me via the forum. Once you register, you can click on this link to private message me: http://bit.ly/davidpip

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Vince 21st January, 2019 @ 16:02

Hi,

I forgot to register the deposit. Can I issue a new AST when the other has expired and register the deposit then? By doing this (if ok) will it resolve the problem? Thanks.

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Simon Pambin 21st January, 2019 @ 16:21

Your tenant can still sue you for non-protection, as you didn't protect the deposit within 30 days of receiving it. In theory, if you did time protecting the deposit and issuing the Prescribed Information to coincide with a new AST, it's just about possible that your tenant might not notice. However, if your tenant does spot the omission, you'll be on the hook for a bigger penalty because you deliberately left the deposit unprotected, just to try and dig yourself out of a hole.

Protect the deposit and issue the prescribed information now. Not only is that the right thing to do, it's also likely to be the least costly.

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Sand 22nd January, 2019 @ 12:27

@David
I am putting my house on the market and I have a tenant in there at the moment, they have told me that they are now going down the council route, which has made me panic as I gave all the relevant information out gas safe etc but totally forgot to secure the deposit in a scheme! the council are asking for all the relevant documents but I can't provide the document for the deposit, which will no doubt lead into the council telling them to stay put until evicted on the sale of the house. I have now registered the deposit but it is after 8-9 months after them moving in.
What can I do?

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David 22nd January, 2019 @ 12:55

@Sand

If you are going to evict before sale on S21 protecting the deposit albeit late may have rectified the issue, but not if you have not served the Prescribed Information.

The S21 will be invalid if it was not correct at the commencement of proceedings, S21 is an accelerated procedure and the service of the notice is considered starting the proceedings. So you really need to have all T's crossed and I's dotted before you serve, but you can reserve a new notice and withdraw previous notice, resetting back to the 2 month notice required.

Section8 eviction proceedings do not have that problem, whilst they are not conditional on the deposit, some Judges allow a counter action on the same ticket and may give the defendant time to file a counter claim.

The best advice I can give is to face this head on, if you failed to protect a the deposit of an assured shorthold tenancy, then seek to reach a settlement with the tenant BEFORE they speak to a Solicitor or Claims company.

The post below gives some advice on how to negotiate a settlement

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

You can be sure that the Council will give the tenant advice getting the S21 thrown out if it is invalid, they will advise them to do so at the last minute and I am certain a few may even refer them to a claims company.

They will not be automatically evicted on the sale of the house, their tenancy rights are not affected by the sale of the house. You must declare if you have sitting tenants to any buyer or agent. An investment buyer may be quite happy to take on your property with the tenant remaining.

You will still be liable for your breach, I would aim to settle at between £300 and 1x the deposit with a settlement agreement.

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Sand 23rd January, 2019 @ 11:42

@David
Thank you for your reply, as the deposit is now registered and the tenant was given all other relevant documents at the beginning (EPC etc) can a S21 now be served? As the tenant is wanting to go down the council route to try to be housed they will more than likely be told to be served an eviction notice to stay housed for longer

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David 23rd January, 2019 @ 15:36

@Sand

As explained in my previous post you need to serve the prescribed information, this needs to include the following below and especially the reference number

Do a search on your property and take screenshots of your deposit being found by a search by member of public putting in the appropriate details on your deposit company site. Claim companies will use a negative result on all three deposit companies in their bundle to show you did not have protection.

Remember in Court evidence is required to show you did things, EPC is not a huge thing, it is usually expected to be on site the property is advertised on, i.e. tenant had access to it BEFORE they signed. More important is that Gas regulations were complied with, I.E. that a safety inspection was carried out within 28 days and a certificate issued.

As I said in last post, if you remedy a problem you may serve the notice but the PI forms part of that remedy and if you have a Gas certificate problem there is debate, waiting on case law or change of law, as to whether it can even be rectified.

Prescribed information relating to tenancy deposits

2.—(1) The following is prescribed information for the purposes of section 213(5) of the Housing Act 2004 (“the Act”)—

(a)the name, address, telephone number, e-mail address and any fax number of the scheme administrator(1) of the authorised tenancy deposit scheme(2) applying to the deposit;
(b)any information contained in a leaflet supplied by the scheme administrator to the landlord which explains the operation of the provisions contained in sections 212 to 215 of, and Schedule 10 to, the Act(3);
(c)the procedures that apply under the scheme by which an amount in respect of a deposit may be paid or repaid to the tenant at the end of the shorthold tenancy(4) (“the tenancy”);
(d)the procedures that apply under the scheme where either the landlord or the tenant is not contactable at the end of the tenancy;
(e)the procedures that apply under the scheme where the landlord and the tenant dispute the amount to be paid or repaid to the tenant in respect of the deposit;
(f)the facilities available under the scheme for enabling a dispute relating to the deposit to be resolved without recourse to litigation; and
(g)the following information in connection with the tenancy in respect of which the deposit has been paid—
(i)the amount of the deposit paid;
(ii)the address of the property to which the tenancy relates;
(iii)the name, address, telephone number, and any e-mail address or fax number of the landlord;
(iv)the name, address, telephone number, and any e-mail address or fax number of the tenant, including such details that should be used by the landlord or scheme administrator for the purpose of contacting the tenant at the end of the tenancy;
(v)the name, address, telephone number and any e-mail address or fax number of any relevant person;
(vi)the circumstances when all or part of the deposit may be retained by the landlord, by reference to the terms of the tenancy; and
(vii)confirmation (in the form of a certificate signed by the landlord) that—
(aa)the information he provides under this sub-paragraph is accurate to the best of his knowledge and belief; and
(bb)he has given the tenant the opportunity to sign any document containing the information provided by the landlord under this article by way of confirmation that the information is accurate to the best of his knowledge and belief.
(2) For the purposes of paragraph (1)(d), the reference to a landlord or a tenant who is not contactable includes a landlord or tenant whose whereabouts are known, but who is failing to respond to communications in respect of the deposit.

https://www.legislation.gov.uk/uksi/2007/797/article/2/made

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Sand 23rd January, 2019 @ 16:06

@David

Hi David, could you clarify what you mean by:

Do a search on your property and take screenshots of your deposit being found by a search by member of public putting in the appropriate details on your deposit company site. Claim companies will use a negative result on all three deposit companies in their bundle to show you did not have protection.

As even though late it was completed, how can I find proof that it has been registered by someone else looking?

The gas safe certificate was in date and has been renewed since the tenant has been there.

With regards to the prescribed information for the purposes of section 213(5) of the Housing Act 2004 (“the Act”)— is this all in the tenancy agreement and has been signed by both tenant and landlord

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David 23rd January, 2019 @ 21:30

@Sand

You can check each deposit company by following the following and entering the deposit amount, date taken, tenant surname etc.

bit.ly/chkdep1

bit.ly/chkdep2

bit.ly/chkdep3

I do not know which one you are with but such a search will simply say "a deposit matching that amount is protected in our scheme" or something similar.

Of course you will be provided with more detailed information if you login to the portal as would the tenant.

Regarding your PI, I have seen a plethora of tenancy agreements that Landlords "think" include the PI but I have found fault in all of them and won every time a Landlord has tried to say the PI is in the agreement when in Court.

The PI cannot be served if the deposit has not been protected, the PI has to refer to an actual protection, if the deposit was not protected until recently the PI in the agreement cannot be accurate, the date of the agreement confirms that. If you want to argue this in Court bring your chequebook.

The reason the Landlord's are sanctioned is because if a tenant was to rely on that information, did a search on one of the above, they would be told the deposit was not protected and thus none of the scheme details would apply.

The tenant would have then lost all the surety of the legislation seeks to provide.

That is why there is a 30 day limit so that a tenant can check the status of the deposit, understand the way the scheme operates, understand their rights if there is a dispute and how they can have their say, etc.

I always advise that the PI is either provided on a separate page or as a page in the appendix with actual details including the reference number, the terms of the scheme and a copy of the certificate of protection. It is good practice for the tenant to sign a copy of these, BUT THEY HAVE TO BE ACCURATE OF ACTUAL PROTECTION.

Understand that a tenant will be advised to log into the portal and check the details of the protection. To make sure it was protected within 30 days of being taken, not from beginning of tenancy. Landlords should not think they can fool anyone, one has to get in front of it, then mitigate the loss by reaching a settlement.

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Sarah 22nd February, 2019 @ 07:26

I got one question. If a tenancy started in 2009 and the deposit was protected after 6 months, even though I have not received any prescribed information.
In November 2017 the landlord repaid the full deposit from his own pocket, without using the money of the scheme. In January 2018 he served S21. The case is in court for a while.

Now my question is: is the S21 valid if the landlord didn’t protect the deposit within 30 days and can he use his own pocket money to repay. I have checked online today now in Feb 2019 and the deposit is protected and available for repayment.
Will the judge agree with the repayment of the deposit by not using the scheme and grant possession to the landlord? I got a court hearing in a week time

Many thanks.

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David 22nd February, 2019 @ 13:19

@Sarah

I there is a limit of 14 days before hearing for filing a defence but you will probably get away with it if you HURRY UP.

The Landlord seems to have rectified the failure on the deposit front, it was protected when the S21 was issued, however if you have never been given the Prescribed Information you can argue that if you want.

What you need to argue for is time to make a Counter Claim, I can help you with that or to negotiate a settlement if you contact me via the forum, instructions are in post 679 above.

It is not guaranteed that the Judge will stop the S21, by itself it is not a reason to stop it as the deposit is now in a scheme and he has repaid it, but some Judges are sympathetic. The repayment does not stop the landlords liability to his/her failure.

You need to consider where you are going, because all you are doing now is delaying things, the landlord wants you out and out you will go, it is just a matter of time.

Now with a tenancy that started in 2009 I am guessing that there were in fact several tenancies, even if you only signed one and it expired, that counts as two as when it expired a statutory periodic tenancy is created in law if you remained in the property. Either way you are entitled to between 1x and 3x the deposit in sanction PER TENANCY because of the failure to issue the PI. The failure to protect for 6 months is a second failure so you might get 2x for that first tenancy and 1x for all subsequent tenancies.

You need to plan for the worst case scenario and see this deposit issue as a separate matter. It is possible the S21 will be granted and the Judge tells you that you were too late to file the Counter Claim, in which case he has to grant you between 14 and 42 days to get out, no more. You can still make a claim against the Landlord, just not as part of those proceedings in front of that Judge at that time.

You need to consider whether you could be classed as a vulnerable tenant, e.g. if you have children or have a mental health problem you can show medical evidence for or if you have a disability etc.

As your case is live I URGE you NOT to discuss it further here but to contact me via the Forum. We can put in a request for the Court to allow you an adjournment until you have had time to prepare a Counter Claim as you are too close for the other side to have evidence to defend it. You will need to pay the Court fee for the Counter Claim for it to be valid or get a dispensation if you are on very low income.

We can discuss more via private message in the forum.

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Sarah 22nd February, 2019 @ 15:08

Hi David thank you very much for your reply. It is much appreciated. I have sent you a private message.

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Matt 4th March, 2019 @ 10:58

Hi There, thank you for taking the time to explain these issues to us novices.

I also have found myself in a situation where I haven't protected the tenants deposit and I'm pretty sure they understand their rights as they have mentioned the deposit scheme. They moved in August 2008 and the council held £550 deposit on bond, the tenants also paid £500 cash deposit which is not protected.

The tenants have served notice and are leaving the property this month. They have not paid the final months rent and have not answered calls or texts regarding the issue.

What is the best course of action? I would prefer to have them pay the rent (£700) and return the deposit to them in full and inform the council that we don't require the bond money. However this still leaves us open to being sued. They entered an AST for 6 months and it has rolled over until now without being re-signed.

If the tenants don't pay the last months rent then we both have a reason to take each other to court - something we want to avoid!

Many thanks for your help.

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David 4th March, 2019 @ 11:28

Hi Matt

No matter what happens they can bring a case against you for EACH tenancy agreement and you should budget on it costing you at least 1x the deposit for each tenancy. The goal will be to reach a settlement and for many tenants it is far easier on them to accept a settlement than go to Court.

For you it is far better to deal with this head on than wait for it to get to a claims company who charge huge fees for what is essentially a template with Tenant and Tenancy details.

Interestingly in my recent negotiations with some of these firms they drop to 1x after receiving my response to claim, but do more work to justify hike in fees.

As you have a live case do not give me details of the tenancies here as it may identify you.

I can think of a letter that may help you, but I would rather they do not see it on the Internet as it would weaken it's impact.

I suggest you contact me via the forum, see post 679 for details for how to do this.

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Natalie 7th March, 2019 @ 10:44

I rented this house via a letting agent on 28/4/15.
6 months later the agency emailed to say they will no longer be managing the property on behalf of the landlord and that I will need to deal with her directly including paying her rent.
This was no problem at all.

In November 2017 I received a letter from my deposit do you want tha in November 2017 I received a letter from MyDeposits stating my deposit was no longer protected as my tenancy had ended. It hasn’t and I still live here.
I started on an AST of six months in April 215 and another was never agreed, so I have remained in a rolling tenancy since October 2015.

I have recently found out that the letting agent has closed down, they did not return the deposit to myself or the landlord.
My landlord didn’t re protect the deposit as she wasn’t aware she needed to or that the previous letting agent holding it had closed down.

I now want to give notice to my landlord as I have found a better property. But she is disputing her responsibility in this and will not give me back my deposit of £675.

She has not given me a new AST, she has failed to re-protect my deposit and she has not done the gas safety check I believe it is over a year late.

On this basis can I give a shorter notice period of maybe two or three weeks ?
And can I possibly withhold my last months rent as it is the same amount as the deposit she’s refusing to give back ?

I do not want to threaten court action as I need her to give a reference to my new landlord.

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David 7th March, 2019 @ 20:46

@Natalie

From a legal point of view, she employed the agent, they took the deposit whilst acting for her. She is ultimately liable for their failure to protect and for your deposit.

Assuming the original tenancy was correctly protected and you were correctly service with a complete copy of the prescribed information (not a certainty), then there is only the rolling tenancy (Statutory Periodic Tenancy) to claim for.

Do not worry about a reference, once she is made aware of her obligation she will negotiate to return your deposit, pay you a sanction of between 1x and 3x the deposit to avoid being held liable for these plus both of your legal fees.

As you have a live case do not give me more details here as it may identify you.

I can prepare a letter of claim for you with an offer to settle the matter including her providing and supporting a positive reference.

I suggest you contact me via the forum, see post 679 for details for how to do this.

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Gruff 20th March, 2019 @ 16:42

My dad started his tencey in 2014/15 i played his deposit through my bank, the landlord never protected it

He's on HB and the rent is covered bar £3.95 PW .
The landlord said if he cleaned the stairs and hall way (accessed by other flats in the block) he didn't have to pay (verbal agreement) but now he's saying that dads in arreas and he's going to evict him

He refuses to do repairs
I.e the window hinge broke he won't fix it
The hot water boiler from upstairs is leaking through the hallway stairs celling
The toilet wouldn't flush for 5 months. Had to use a bucket for it to flush
There is mould every where supposedly to my dad using the flat wrong! He doesn't have a dryer the window s are opened daily there is no form of heating bar a oil radiator which dad brought

Where does he stand please

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David 20th March, 2019 @ 21:33

@Gruff

If his tenancy started in 2014/15 I imagine he has at least 2 tenancies (perhaps more), so he can make a claim for between 1x and 3x the deposit for EACH tenancy.

There are two ways to evict, the mandatory method for rent arrears requires 2 months of arrears and can be stopped in it's tracks by getting the arrears under 2 months.

The no fault S21 eviction requires evidence that

Energy Performance Certificate was provided before the tenancy
Valid Gas Safety certificate provided within 28 days and annually
The lastest How to Rent Document provided
Deposit Protected
Prescribed information regarding deposit provided

If we can find emails or something that confirms the claim the shortfall can be disputed.

The repairs need to be reported to the Council and an improvement Order will be issued. This will prevent serving of S21 for 6 months under revenge eviction.

Today the Homes (Fitness for Human Habitation) Act 2018 came into law, it will deal with the mould.

The Council will look at the mould and determine source or you can get a quote as if it is your property, it is often a gutter or wall that has damp outside.

As you have a live case I would not advise discussing further here on this open blog, He is in a very strong position because he can inform the Landlord of the above and done properly it could be dragged out for 12 to 18 months. I can help you reach a settlement if you wish to contact me via the forum.

Once you register, you can click on this link to private message me: http://bit.ly/davidpip

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Tim 27th May, 2019 @ 18:29

Hi David,
Just want some advice please. I had started an AST as a Landlord with a tenant a year ago and forgot to protect the deposit. AST went on SPT as AST was not renewed. Now I have realised my mistake. What do I do to protect myself now? Please advice!
Thanks
Tim

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David 28th May, 2019 @ 11:31

@Tim

Protecting it as soon as you become aware offers SOME mitigation, so I would get on with that.

The tenant will be informed by the deposit company, but that is not a problem unless you are in a hostile situation with them.

You will potentially be liable for between 1-3 times the deposit per tenancy but can usually negotiate that down to 1x per tenancy, you want to get ahead of it by negotiating a settlement agreement BEFORE they speak to a claims company.

You do not say how many tenants there are, if they are not partners or related you may be able to settle with one of them with a firm agreement (I can help with that) and snooker the other tenant(s).

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Tim 29th May, 2019 @ 19:39

Hi David,
Thanks for your message and offer to help. I had one tenant during this time, Tenant has a partner living with him. Both are on the contract. They are still living and no problem so far.
Thanks
Tim

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David 30th May, 2019 @ 11:35

@Tim

I always think that it is a good idea to face these things head on, you can say that there was an admin error at your end or some try to suggest that they are moving it from one scheme to another (as often happens when moving from an agent to a Landlord managing property).

Either way you want to lock them down with a settlement agreement, the article below is for once they have twigged that you screwed up but you can adapt the process

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

As you have a live case I would not advise discussing further here on this open blog, if you want help doing a settlement agreement I suggest you contact me via the Landlord forum Link at top of page Once you register, you can click on this link to private message me: http://bit.ly/davidpip

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Tim 2nd June, 2019 @ 10:37

Hi David,
I am unable to PM you. Can you help please.
Thanks
Tim

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David 2nd June, 2019 @ 23:06

@Tim

I got your PM and replied.

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Matt 16th June, 2019 @ 10:31

Guys...

In a pickle!

Became a new landlord in 2017, block of 4 flats!

I assumed (clearly incorrectly) that the Letting Agent posted the bond, but reality this wasn't the case. Tenant moved out Jan 2019, without any notice, trashed the place and didn't pay the last months rent! GREAT!

I then received a court notice for £2000 for the bond (Bond x £525 x 4) apparently its the law!

So yes i'm a muppet for not understanding the issues of protecting the bond, but is this correct? I have to respond to the court paperwork, am I best just paying the dam money?

it cost us nearly £900 to make good the property!

HELP....

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David 16th June, 2019 @ 20:45

Hi Matt

Do not worry, we will not only negotiate this down but the threat of a counter claim will do the trick but the approach is different depending on the firm.

As you have a live case I suggest you contact me via the forum using the link below

https://www.landlordforumproject.co.uk

Join the forum, confirm the email and then follow the link below which has an option to send me a private message.

http://bit.ly/davidpip

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annamarie 18th June, 2019 @ 16:22

Hello, i have been in a rented house for 2 years this december, i have just checked all the deposit schemes and they have all said my deposit is not registered. I have a letter from my letting agent to say it is with TDS however after speaking to TDS they said it is not registered in either the insurance or the custodial scheme.
What should i do now?

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David 18th June, 2019 @ 16:35

@AnnaMarie

I can help you write a letter to achieve a settlement out of Court without using a claim company (who take 35%) and without the onerous fees that the claims companies put on Landlords.

If you would like to contact me via the forum using instructions in post 703 I will draft you a letter after collecting the details and verifying you definitely have claims.

Your Landlord should be pleased they have avoided a claims company.

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Lynn 26th June, 2019 @ 13:39

Can a landlord take a month in advance rent and not protect it if the tenant is in agreement
Thanks

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David 26th June, 2019 @ 13:55

@Lynn

There is no avoiding taking a deposit and you are no longer allowed to take more than 5 weeks deposit (new tenancies from June and all tenancies from June 2020).

You can take a months rent upfront but you can't construct ways to avoid deposit protection and expect to be able to make deductions, in other words if it looks like a duck and quacks like a duck, it IS a duck.

All the claims company has to do (and I have had many do it) is claim under the legislation and ask the Judge to deem it a deposit.

If you do not take a deposit and there is nothing to protect you for the performance of the contract save litigation of breach of the contract then there is nothing to protect.

You can also take 6 months rent on a revolving credit but in such circumstances I strongly advise taking a deposit as well and protecting it just to avoid your financial arrangement being deemed as a deposit.

It is far easier to just take the deposit, protect it in a custodial scheme so there is no fee and obey the legislation. You have every right to take a deposit for the performance of the contract, all you have to do is protect it. Also it is often easier to have the DPS decide if you can make deductions or you can still go to Court by declining them being arbiter.

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