Landlord And Tenants Law
Introduction to Deposit Scheme
Deposit Scheme
- A landlord after 6th April 2007 must safeguard the deposit of an assured shorthold tenant’s deposit in appropriate Government approved deposit protection scheme.
- It also includes the renewal of tenancy after 6th April 2007, where the initial deposit may have been held by the landlord. At the renewal of tenancy, the deposit must be protected through an appropriate Government approved deposit protection scheme
- It is primarily for Private landlords who generally let their properties as Assured Shorthold.
- The deposit must be safeguarded within the 30 days of its receipt
- Landlord is also obliged to provide the prescribed information relating to deposit and the scheme to the tenant within 30 days of its receipt
- A failure to do so on the behalf of a landlord may result in a penalty. The landlord would have to repay the deposit and also has to pay money to tenant some compensation as well
Example
The deposit for Martin’s Assured Shorthold Tenancy was £100. His landlord Mr Taylor failed to deposit it in 30 days of its receipt. Mr Taylor must deposit the money into a scheme and may also have to pay a compensation to tenant/Martin
Prescribed Information
The landlord must provide following details
- The contact details of the tenancy deposit scheme provider
- The procedure for repayment of the deposit
- The procedure to be followed if either the landlord or the tenant is not or cannot be traced
- The details to be followed in case of dispute
- The information must also clearly state
- The amount of the deposit
- The address of the property which is rented
- The contact details of landlord or his agent
- The contact details of any other party relevant to the tenancy
- The detail of circumstances in which a landlord may retain any or all of the deposit
- The landlord must also certify that the above-mentioned information is not only correct and tenant is given the opportunity of confirming the correctness of the information
Types of Deposit Schemes
There are two major schemes
- The Custodial Scheme
- Insurance Based Scheme
Custodial Scheme
- This is a most appropriate scheme for landlords who hold a small number of rental properties. The scheme provider holds the deposit on behalf of landlord and tenants.
- Neither the landlord nor the tenant pays any fee to use the scheme
- At the end of tenancy, the landlord and tenants must jointly ask for the deposit to be repaid
- If they agree on the proportion each will receive then the deposit will be distributed accordingly plus any surplus interest it may have gathered
- In case of a dispute between landlord and tenant the scheme offers an Alternate Dispute Resolution (ADR) service to assist the parties
- The tenant can also lodge a claim to a court under small claims, the scheme provider will then distribute the deposit in the light of the decision of court or ADR
The Insurance Based Scheme
- This scheme is more suitable to professional landlords with a large number of rented properties or for letting agents.
- Under insurance based scheme the landlord retains the deposits, however, pays a fixed premium to the scheme provider.
- In the case of a dispute between the Landlord and the Tenant, the Insurance scheme provider will intervene. It will offer and Alternate Dispute Resolution service.
- The landlord then must hand over the deposit to the insurer until the dispute is resolved either by ADR or by court
- The failure of a landlord to deposit the amount to the insurer will not affect the tenant as the insurer will compensate the tenant.
More than One Tenant
Where there are more than one tenants who have contributed in the deposit, the landlord can decide whether to register separate deposits in the name of each individual tenant or nominate a lead tenant in whose name the deposit will be registered. It is important to note that where there are several joint tenants and one of joint tenant leave the property before the end of the tenancy will not necessarily be entitled to the deposit at that particular stage. However, the tenant may still remain liable for any damage to property or any other obligations and the deposit will be returnable at the end of the tenancy unless otherwise agreed between remaining tenants and landlord.
Miscellaneous obligations
- The deposit must be protected irrespective of by whom it is paid i.e. local council, parents or friends of the tenant.
- It is the duty of a landlord to notify any changes to the identity of the landlord or the tenant or any other changes to a tenancy to the deposit scheme provider.
- In case where a tenant or landlord is uncooperative or will not complete the joint repayment form, the remaining party can apply for a release of the deposit at the end of tenancy, by submitting a claim along with a statutory declaration setting out the reasons why the other party is not cooperating and a single claim is made. A copy of such declaration must also be sent to the last known address of the uncooperative party
Penalties for non-compliance
Where the deposit has not been properly secured by the landlord or where the required information has not been provided within 30 days by the landlord, the tenant can lodge an application to the Court under s214 of the Housing Act 2004.
Remedies
The court may award following remedies to a tenant where the tenancy is still in existence,
- Order that the deposit must be repaid to the tenant within 14 days
- Or an order to pay a tenant within 14 days an amount not less than the amount of the deposit and not more than three times the deposit
- A tenant can ask for return of deposit and any compensation as well at the same time, within the same application
Where the tenancy has ended a court may order
- Order that the deposit must be repaid to the tenant within 14 days, provided there was a proper reason for the landlord to withhold the deposit
- Or an order to pay a tenant within 14 days an amount not less than the amount of the deposit and not more than three times the deposit
- A tenant can ask for return of deposit and any compensation as well at the same time, within the same application
Very Important for both Landlords and Tenants
Possession proceedings (Section 21 Notice)
Where a landlord failed to safeguard the deposit, and provide the prescribed information, such landlord will not be able to serve possession notice under the Housing Act 1988, S 21.
Section 21 Notice
Allows a landlord to compulsory possession of an Assured Shorthold Tenancy upon the expiry of the term or time period of Shorthold Tenancy or expiry of the fixed term.
Example
Ali was granted an Assured Shorthold Tenancy for 12 months. After the expiry of 12 months, Ali’s landlord can obtain the possession by serving a Section 21 Notice to Ali, However, if Ali’s landlord has not complied with the requirements of protection of deposit, he will not be allowed to use section 21 for obtaining possession, which is a difficult situation for a landlord.
However, where a landlord returns the deposit or other amount agreed between the landlord and deposit or where a tenant has settled his case in court or through ADR, the landlord can serve Section 21 Notice.
For a landlord to pursue a possession under section 21 for an Assured Shorthold tenancy, must be able to supply proof that the deposit has been safeguarded and the prescribed information has been given to the relevant parties.
Rent Deposit Scheme providers
- The Deposit Protection Service (depositprotection.com)
- Tenancy Deposit Solutions Ltd (mydeposits.co.uk)
- The Dispute Service Ltd (thedisputeservice.co.uk)
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Disclaimer
While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legallex does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.
