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GUIDES

Updates to the Tenancy Deposit Scheme

Tenancy Deposit Scheme Updates

It may not have come to the attention of some Landlords but the Localism Act 2011 which came into effect from the 6th April 2012 contains some important changes to the Tenancy Deposit Scheme (TDS).

The TDS came into force for all new assured shorthold tenancies created on or after the 6th April 2007. Landlords have up April this year been required to protect any deposit that they receive from the Tenant in respect of all tenancies which started or renewed after the 6th April 2007.

What Is The Purpose Of The Tenancy Deposit Scheme?

The original intention of the TDS was to provide Tenants with some protection from unscrupulous Landlords, who would often retain deposits at the end of tenancies for months at a time, claiming for everything from cleaning to repair bills simply to use up the deposit they were holding and entirely unjustifiably in many cases. The TDS was intended to ensure Tenants who had met the terms of the tenancy agreement and had not damaged the property were able to recover their deposits at the end of the tenancy.

The Three Types of Tenancy Deposit Scheme

  • The Tenancy Deposit Scheme run by the Dispute Service Ltd;
  • MyDeposits operated by Tenancy Deposit Solutions Ltd; and
  • The Deposit Protection Service run by ComputerShare Investor Services Ltd.

While the advent of the TDS provided greater protection to Tenants, the requirements placed on Landlords to register the deposits with one of these Schemes and provide the Tenant with written confirmation of this within 14 days of taking the original deposit caused Landlords a number of problems.

In particular, failure to comply with the deposit requirements within the 14 day period left Landlords open to legal claims from Tenants for up to three times the original deposit sum, which in some cases could be a significant amount. As Tenants have become more aware of their rights in respect of the TDS, the number of claims against Landlords has significantly increased.

Tenancy Deposit Scheme Updates in 2012

However, there is some good news for Landlords in the Localism Act 2011. The changes to the TDS introduced by the Act came into force on 6th April 2012:

  • New tenancies created on or after 6th April 2012 will be covered by the new requirements (that includes existing tenancies which may become periodic tenancies after that date);
  • Tenancies already in existence on 6th April 2012 needed to be made compliant within 30 days of the new requirements, if they had not already become so (in effect an amnesty period for those Landlords who had fallen foul of the current regulations)
  • The new requirements only apply to Court proceedings for a breach of the Housing Act where those proceedings are started on or after 6th April 2012.

14 Days Extended To 30 days

The Housing Act 2004 required that for all new assured short-hold tenancies created on or after the 6th April 2007 when a Landlord received a deposit he must within 14 days of receipt:

  • provide the ‘prescribed information’ to the Tenant and any other relevant person; and
  • comply with the ‘initial requirements’ of the scheme.

From the 6th April 2012 the 14 days will be extended to 30 days. Previously the Landlord was able to comply with the obligations at any time up to the Court hearing date in order to avoid the sanctions for non-compliance. However, this will no longer be the case.

The Landlord will now have to ensure that the deposit is protected within 30 days of receiving the deposit and also that the prescribed information is provided to the Tenant within the same 30 days. The Tenant will be able to make a claim against the Landlord from a date which is 31 days after the deposit payment if the requirements relating to protection have not been met.

Sanctions For Failing To Comply

It’s not all good news for Landlords. With the extra time they have been afforded by the Act come further sanctions for failure to comply.

They are as follows:

  • The Landlord will not be able to serve a section 21 notice (to bring an assured shorthold tenancy to an end on two months’ notice) if he has not paid the deposit into one of the schemes.
  • The notice can only be served:
    • if the deposit has been returned to the Tenant in full; or
    • with such deductions as the Tenant agrees; or
    • if the Tenant has taken proceedings against the Landlord for non-protection and those proceedings have been concluded, withdrawn or settled.
  • If a Landlord pays the deposit into a scheme but fails to serve the prescribed information within the 30 days time period, he cannot serve a Section 21 Notice until the prescribed information has been served – but this can be more than 30 days after receiving the deposit. However, the Tenant will still be able to issue proceedings for providing the information late and there may be damages awarded to the Tenant as a result.
  • The Tenant can apply to the Court to have their deposit returned because of non-compliance. If successful, the Court has discretion to order the Landlord to pay a penalty amounting up to three times the deposit. Tenants can make an application to a County Court for a penalty award even where the tenancy has ended, and can do so for up to six years after the original tenancy has come to an end.
  • At a time when the private rental market is so buoyant and one of the few positives for private investors, it is important that you ensure that you deal with deposits promptly and correctly in order to avoid any sanctions.

How Can We Help Landlords With The TDS?

Our Commercial Property Team at Oliver & Co Solicitors can provide practical and effective advice to Landlords and Managing Agents to ensure that you comply with the new legislation.

Call and speak to a member of our team on 01244 312306.

For comprehensive guidance on tenancy matters, visit our Landlord & Tenant Business Law Services page to see how Oliver & Co can support you.

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