It is a legal requirement, since 6th April 2007, that a landlord must protect a tenancy deposit in a Government-backed tenancy deposit scheme. In England and Wales the approved schemes are; Deposit Protection Service; My Deposits; and Tenancy Deposit Scheme. There are separate schemes for Scotland and Northern Ireland.
However, a recent survey by the National Landlords Association found that a significant proportion of their members did not correctly protect their tenants deposits in an approved scheme.
What are tenancy deposit schemes?
Tenancy deposit schemes have the authority to govern and oversee the process of deposit returns, deductions and disputes. They offer independent adjudication for any dispute over deductions.
What a landlord must do
To legally protect a tenancy deposit, the landlord must do the following.
- A tenancy deposit must not exceed five weeks rent (if the annual rent is less than £50,000)
- After receiving the deposit, a landlord has 30 days to register it with one of the three Government-backed schemes.
- Also within 30 days, the tenants must be given the Prescribed Information; The amount of the deposit; The address of the property; The name, address and contact details of the administrator of the tenancy deposit scheme with which the deposit is held; The name, address and contact details of the landlord and tenants and any third parties who have contributed to the deposit.
Some landlords may still not know this obligation, or may have forgotten about it. Also some landlords believe that they do not have to protect the deposit until they have the full amount if the tenant is paying the deposit in installments. There is no excuse in law to not protect the deposit in time.
At the end of the tenancy, the landlord must return the deposit within 10 days of agreement between the landlord and tenant of the amount to be returned.
Failure to follow these steps could result in a tenant bringing a claim against the landlord which will be compensation for at least for the deposit amount. However it has the potential to be for up to 3 times the deposit amount.
It will also mean that the landlord will be unable to serve a valid 21 Notice to regain possession, meaning that pursuing an eviction will become very difficult.
In order to retain control full control of the future of the investment, landlords should ensure that they properly register all tenancy deposits within the required timescale and with an approved scheme. Tenancy deposit schemes exist for the benefit of everyone, to protect good landlords from bad tenants and good tenants from bad landlords.
Gov.UK. 2019. Accessed 22nd November, 2019, from https://www.gov.uk/tenancy-deposit-protection
Landlord Law Blog. 2019. Accessed 22nd November, 2019, from https://www.landlordlawblog.co.uk/2019/11/20/landlords-forgotten-protect-tenants-deposit/
Pads for Students. 2019. Accessed 22nd November, 2019, from https://www.padsforstudents.co.uk/blog_article/are-you-protecting-student-tenants-deposits-properly-90-are-not/
My Deposits. 2019. Accessed 22nd November, 2019, from https://www.mydeposits.co.uk/blogcat/what-you-need-to-know-about-the-tenant-fees-act-2019/#:~:targetText=From%201%20June%202019%2C%20the,adhere%20to%20the%20new%20regulations.