Landlords must act carefully with rental deposits


Claims for incorrectly handled property rental deposits are soaring and landlords should be alert to the danger and ensure they or their agents are complying with the legal requirements, if they want to avoid high penalties.

According to figures from insurers, the number of claims relating to deposits peaked at 25% of all professional indemnity claims made by estate and letting agents in the first quarter of this year, up from just 3% last year[1]. The claims most often relate to a landlord lodging a deposit late or failing to provide the correct information to the tenant about the terms and the deposit scheme used.

Under the Housing Act 2004, any deposit must be held by the landlord in a registered deposit protection scheme and the tenant must be given specific details of the deposit protection scheme used and details about how the scheme works within 30 days.

If a court rules that a landlord has failed in their duty, it can impose fines of up to three times the value of the deposit, which must be paid within 14 days of the court order.

Depending upon the circumstances, a landlord may be able to bring a claim against the letting agent, if there is one involved, who in turn may rely on their professional indemnity insurance. In any event mishandling tenant deposits can be a costly mistake and bad in reputational terms for those concerned.

The prescribed information that must be provided to the tenant includes:

[1] Claims data compiled by DAC Beachcroft. 

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Please contact Sam Pinder for further information.

Sam Pinder

Senior Associate
Commercial Disputes
Property Disputes

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