Protecting deposits vital for landlords

Joseph Brightman, a solicitor specialising in landlord and tenant matters at Attwells Solicitors, reminds residential landlords of the importance of registering deposits paid by tenants

Joseph Brightman, a solicitor specialising in landlord and tenant matters at Attwells Solicitors, reminds residential landlords of the importance of registering deposits paid by tenants

SINCE April 1, 2007, the Housing Act (2004) has placed an obligation on a landlord who lets a property under an Assured Shorthold Tenancy to protect the security deposit within a Deposit Protection Scheme.

Various schemes exist but, briefly, they fall into two categories. The first is that the money is held in a separate designated account and should the landlord wish to make any deductions it must make an application to the relevant scheme provider and if necessary any dispute be resolved by an independent adjudicator.

The second is an insurance-based scheme where landlords retains the security deposit themselves but in the event that the landlord does not comply with the scheme or return any of the money to the tenant the insurance policy will pay out those funds and pursue the lLandlord themselves.


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In both cases, the tenant can be sure of having an independent mechanism for determining how much money should be returned to them at the end of the tenancy.

The Housing Act (2004) goes further than just requiring protection of the security deposit. It also requires that information is provided to the tenant regarding the specific Deposit Protection Scheme that is being used and details of how the tenant can dispute any deductions the landlord proposes to make.

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The obligation on the landlord is therefore two-fold - firstly to protect the money and secondly to provide the required information to the tenant about the method of protection.

The consequences of a failure to protect the deposit in accordance with the legislation can be serious. Firstly, the landlord is prevented from serving a Section 21 Notice on the tenant. This is the usual form of notice that is served by the landlord in order to preserve its right to possession of the property at the end of the contractual term. The removal of the right to serve this notice means that the tenant can only be evicted in the event of non-payment of rent or some other breach of the tenancy terms.

The second consequence of failing to protect the deposit is that the landlord must, on application by the tenant, repay the deposit in full and also pay the tenant a sum of money equal to three times the amount of the deposit. The court has no discretion as to whether or not to order the landlord to pay this sum; it is obliged to make the order if it finds that the tenancy security deposit has not been protected.

From the landlord's point of view, it is therefore vital that the deposit is protected within the prescribed time scale of 14 days from the date of receipt of the deposit.

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