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Landlords to re-protect deposits

15th May 2015

An article by Rosie Kiley.

 

Where private landlords receive a deposit from their tenant for Assured Shorthold Tenancy agreements entered into after 6 April 2007, they are legally required to pay the deposit into a government authorised deposit scheme within 30 days of receipt. Not only must the landlord protect the deposit, but must also serve the scheme provider’s ‘prescribed information’ on the tenant to allow the tenant to read and agree to the terms of the scheme. Preferably, the landlord will receive a signed copy of the prescribed information back from the tenant which will help to prove it has been served.

Failure to carry out the above steps may lead to a claim by the tenant for non-compliance with the requirement set out in the Housing Act 2004. The penalty would be for the return of the deposit to the tenant, plus compensation up to three times the value of the deposit. This means the tenant could secure a CCJ against their landlord of up to four times the value of the deposit, simply for their failure to protect and/or serve the prescribed information about the scheme on the tenant. It is not necessarily sufficient to argue that a letting agent was instructed to deal with this part of the tenancy arrangements, as the Act states that the court must order the landlord to pay the compensation.  

A further problem arises where the period within the Assured Shorthold Tenancy comes to an end and the landlord and tenant agree to continue with the tenancy agreement. Unless a new tenancy agreement is entered into, the court will deem the Assured Shorthold Tenancy as ended, and the tenant will occupy the property under what is known as a ‘periodic tenancy’. The period of tenancy will be based on the frequency of the contractual rent, ie, monthly rent creates a monthly periodic tenancy.

It is at the point where the Assured Shorthold Tenancy ends and the periodic tenancy arises that the court decided in the cases of Superstrike Ltd v Rodrigues (2013) and Gardner v McCusker (2014) that the landlord must re-protect the deposit and re-serve the prescribed information from the scheme provider on the tenant. This is regardless of whether the previous Assured Shorthold Tenancy was entered before or after 6 April 2007.

Landlords and tenants alike should also be aware of a further important sanction for the landlord’s failure to protect the deposit and/or serve the prescribed information: that the landlord is unable to serve a valid s21 Notice Seeking Possession on the tenant.

The decision in Gardner v McCusker (2014) is not legally binding as it was decided in the County Court. However, the details may assist the tenant in a claim until such time as a precedent has been set by a higher court.   

If you would like further information regarding Landlord and Tenant disputes or re-protecting a lettings deposit please contact our Dispute Resolution team at your local BHP office in Newcastle, Darlington, Durham or Stockton in Teesside, or call 0800 590 019 now for some initial advice.