The Tenancy Deposit Scheme (TDS) protects the deposit paid by a tenant under their tenancy agreement. It only applies to agreements created after 6 April 2007 when the Scheme came into effect.
But since the introduction of The Localism Act 2011 – introduced 6 April last year – landlords need to be more vigilant in ensuring deposits are protected or risk losing not only money they are owed, but not being able to obtain possession of their property.
The Localism Act governs the TDS and confirmed that landlords must protect a deposit through a TDS within 30 days.
As well as protecting the deposit, landlords must also provide the prescribed information to the tenant within the 30 days – information such as the value of the deposit, where it is protected and the address of the rented property.
Landlords should never presume that the tenant will access the ‘prescribed information’ online or through an agent. And if a new tenancy agreement is created, for example, because of an increase in rent, it is advisable to re-protect the deposit.
Failure to protect a deposit and to provide the right information to those renting from you is an open door for a tenant to pursue a claim for compensation, which can be up to three times the value of the deposit. Tenants can make this claim even after the tenancy agreement has ended.
Not only could the landlord be ordered to pay monetary compensation to the tenant, but they could also be prevented from evicting the tenant from the property. For example, if the tenant refuses to leave the property when the tenancy expires or when the landlord wishes to re-let it, the landlord may be forced to issue court proceedings to request that a Judge order the tenant to leave the property. But if the deposit is not protected, the Judge is likely to protect the tenant by refusing the landlord’s request. Failure to adhere to the deposit rules is therefore likely to be expensive and frustrating for the landlord.
In the Court of Appeal case of Superstrike Ltd v Rodrigues, decided in June this year, the landlord was refused possession of the property as the tenant’s deposit had not been protected within a TDS.
This case concerned a tenancy that was created before the introduction of the deposit rules in April 2007. However, when the initial fixed tenancy term expired in January 2008 the agreement continued automatically on a statutory periodic basis, when it was mandatory to protect the deposit. In 2011 a formal notice was served on the tenant confirming the landlord wanted the property back, giving the tenant at least two months notice to leave the property.
The tenant did not wish to leave and defended the proceedings and won based on the fact that the statutory periodic tenancy agreement, created in 2008, was new and so should have been protected. The tenant was therefore not evicted from the property.
If a landlord has missed the 30 day cut off, the best approach is to still protect the deposit but at a risk that the landlord may not be able to evict the tenant when the tenancy has ended. Alternatively, the landlord may grant the tenant a new assured shorthold tenancy and then protect the deposit under the terms of the new agreement.
Ensuring the deposit is protected under every tenancy agreement may seem a tedious and time consuming task but landlords should see it as a short term investment to protecting them and their property and, if in doubt, seek legal advice.
For further information, please contact Judith Rountree on 01635 508080.