The requirement for landlords to protect deposits has been in law for some time now, but many landlords are still unaware of the requirements or implications.

This article is aimed at both residential landlords that have taken a deposit from their tenant and also tenants that have paid a deposit to their landlords. This overview is applicable to assured shorthold tenancy deposits taken after 6 April 2012 (as most residential tenancies are).  If you have taken a deposit prior to that date different rules apply.

Landlords and tenants need to be aware that, if a deposit has been paid by a tenant, which the landlord has failed to protect, or has protected late, the tenant could be entitled to compensation under the Housing Act 2004.

Sections 213 – 215 of the Housing Act 2004 (the Act)

Section 213 of the Act requires that any tenancy deposit taken by a landlord be protected in an authorised tenancy deposit scheme within 30 days of the deposit being paid. The landlord must also serve certain documents upon the tenant within 30 days of receiving a tenancy deposit. These documents are known as the “prescribed information” and relate to the details of the protection of the deposit.  

If the landlord fails to protect the deposit in time, or at all, Sections 214-215 of the Act provide for two sanctions for the landlord, these are:

1. The landlord may not serve a section 21 notice; and
2. The tenant is entitled to the return of the deposit, plus compensation of between 1 – 3 times the value of the deposit amount.

The impact of the first sanction upon landlords is that they may struggle to evict their tenants at the end of the fixed term of the tenancy. There are methods to circumvent this sanction in some circumstances, such as the immediate return of the deposit. However, the tenant remains entitled to compensation of between 1 – 3 times the deposit amount. This is a statutory right enjoyed by the tenant to which there is no defence.

How much compensation?

The actual amount of compensation due to the tenant is at the discretion of the court but must be between 1 – 3 times the deposit amount (Section 214.4 of the Act). However, given that compensation is due as of right, should a deposit not be protected correctly, often the parties can agree the compensation amount without the need for court proceedings. If the compensation amount cannot be agreed, the tenant’s option is to issue court proceedings. When deciding how much to award the tenant the court will consider all relevant factors. However, case law has confirmed that the culpability of the landlord is the most relevant factor when deciding the compensation amount.

What should I do if these circumstances apply to me?

If you are a landlord and are worried you have not protected your tenant’s deposit correctly, the advice to you is simple: seek immediate legal advice.

If you are a tenant and do not believe your landlord has protected your deposit correctly then you are likely entitled to compensation from them. You have up to 6 years in which you are able to make a claim against your landlord. Due to this, it can be usually sensible to wait until your tenancy has ended and you have moved out of the property before seeking payment from them. But given the other implications of failing to secure the deposit, if you receive a notice seeking possession and do not wish to (or are unable to) move out you should seek legal advice to ensure you receive the compensation you are entitled to and are not unlawfully evicted.

How can BHP Law help?

Here at BHP Law we specialise in landlord and tenant disputes. If you are a landlord we may be able to negotiate a smaller amount of compensation by looking at the wider circumstances of the tenancy and negotiating with the tenant. We can also represent you should court proceedings be issued by the tenant.

Alternatively, if you are a tenant, or have been a tenant, we can seek to maximise the compensation you are due from your landlord, or ex landlord. If court proceedings are necessary we can complete all the necessary work for you. This ensures you have the best possible chance of maximising the compensation payable to you. In addition to this, in certain circumstances, we may be able to act for you on a “no win no fee” basis.

If any of this article applies to you, get in touch with us at JoshF@bhplaw.co.uk or call 01325 466 794 and we will be happy to go through matters with you.