Landlords beware (again!) – new deposit rules now in force

Since 2007, landlords of houses and flats have been legally obliged to “protect” their tenants’ rent/security deposits. Deposits must either be paid into an authorised scheme or be registered and insured with such a scheme. Landlords are also obliged to give tenants full written details, including the scheme reference number. The requirements initially had to be met within 14 days of taking the deposit, a tight timescale. In default, a landlord could not serve a valid possession notice on the tenant, and the tenant could ask the court to make the landlord pay an automatic penalty amounting to three times the amount of the deposit.

Tenants’ advisers and consumer agencies were quick to advise tenants of the statutory provisions, and many landlords were caught out. The courts however then gave successive interpretative decisions watering down the strict requirements to the point where landlords could comply late with little penalty, or even not comply at all after the tenancy had ended.

The government has now acted to give this law its teeth back. From 6th April 2012, by the Localism Act 2011 the law has been considerably tightened up.

The only good news for landlords is that they now have 30 days from when they receive the deposit, rather than 14 as before. But the consequences of not being in full compliance within that period are now applied much more strictly. Even if landlords comply late, they will still be liable to pay tenants a penalty of between one and three times the amount of deposit. Furthermore, it appears that landlords will not be able to serve a possession notice without first returning the deposit to the tenants. And the loophole previously identified by the courts of allowing landlords off the hook once the tenancy had actually ended has now been closed.

So, the hard edges of the deposit regime have been reinstated and this is a real and immediate risk area for landlords. Landlords must comply at the right time or face punitive consequences. Act now!

For more information on this subject or on tenancy/leases generally, please contact Matthew Melling LLB AKC, Associate Solicitor with Machins Solicitors LLP specialising in landlord/tenant and other property disputes and claims – on 01582 514391/514380.