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Deposit Rules

On April 6th 2012 the legislation regarding tenancy deposits changed. As a landlord when you take a deposit from your tenant it is vital you ensure you take the following three steps within a maximum of 30 days to comply with the new regulations:

1. Protect the tenants deposit within an approved scheme
2. Give your tenants any leaflets provided by your chosen deposit protection scheme
3. Provide the rest of the prescribed information not covered within the leaflet. It is particularly important that you make clear to your tenant the clause in their tenancy agreement dealing with deductions from the deposit
Landlords must keep in mind that the 30 day time frame given begins on the day the deposit is received regardless of whether the tenant has moved into the property or not at that point.

The RLA state “When it comes to giving the prescribed information the crucial date is the date it is actually received by the tenants; not the date it is posted. You can give the prescribed information before the deposit is actually protected. The legislation says it must be given within 30 days of receipt and not 30 days from actually protecting the deposit.”
When it comes to prescribed information some schemes are more helpful to landlords than others, no matter which scheme you decide on be certain to ask exactly what you need to tell your tenants.

In the event that you do not protect the deposit within an approved scheme and serve your tenants with the prescribed information they may claim a penalty of up to three times the sum of the deposit they gave on the property and demand the return of their deposit during any point within the next six years. As the majority of landlords take a deposit of four to six weeks rent failure to comply can prove very costly! In addition to financial ramifications failure to comply with the latest regulations will result in the landlord being unable to use the ‘notice only’ possession procedure. At this time a landlord may obtain an order for possession of an AST at any stage once the first six months of the tenancy has expired; as long as the landlord gives the tenant at least two months’ notice in writing under section 21 of the Housing Act 1988 and providing any fixed term has expired, this is known as ‘notice-only’. Should the landlord not be fully compliant in protecting the tenants deposit and passing on the prescribed information within the set 30 days they will be unable to obtain possession of their property via the standard ‘notice only grounds’.
The recent case of Ayunnuga v Swindells clearly stresses the importance that all landlords comply with the new legislation. In this particular case the landlord correctly safeguarded the tenants deposit within an approved deposit scheme and gave the tenant information confirming where the deposit was held. However, the Landlord failed to fully comply with the regulations by not providing the prescribed information to the tenant.
During the tenancy unfortunately the tenant fell into rent arrears, subsequently possession proceedings were issued by the landlord. The tenant counter claimed for the recovery of the deposit plus three times the value of the deposit on the basis of the landlords’ non compliancy.

As a response to this counter claim the landlord put forward the argument that the primary purpose of the latest legislation is to protect the tenants’ deposit. The landlord admitted that failing to provide the prescribed information did breach the new TDS regulations, however, a claim was made that is was a purely procedural breach which in no way defeated the primary purpose of the legislation – to protect the deposit payment. It was also argued that the tenant could very easily have acquired the small pieces of information which the landlord had not given simply by contacting the tenancy deposit scheme provider. Following this argument the judge found in favour of the landlord and dismissed the tenants counter claim.
This dismissal was soon followed by a hearing at the Court of Appeal, there the dismissal was overturned and it was noted that it is vital for all information to be provided to the tenant in order that they may fully understand how they can deal with disputes and recover their deposit.
Although the error made by the landlord may seem insignificant given that the information was available to the tenant, the law was still broken, and as a consequence the landlord in this case was ordered to pay the tenant the maximum penalty of repaying the deposit and paying the fine of three times the value of the deposit.
With regard to this case Luke Maunder, property specialist at the law firm Barlow Robbins, states:

“This case has important implications for residential landlords and residential agents…All residential landlords and letting agents need to take note of the important decision in Ayannuga v Swindells and make sure that they provide all the necessary prescribed information, ideally well within the 30 days allowed.”
In light of this case it is advisable that all landlords check their records to ensure they are fully complying with the new regulations in order to avoid costly penalties.


Written by – Urban Sales and Lettings, letting and selling property online

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