An Introduction to Deposit Protection Schemes for Landlords
As house prices continue to rise, it is estimated that a quarter of UK households will be privately renting by the end of year 2021. This stresses the importance of providing greater protection to both landlords and tenants entering into tenancy agreements.
From 6th April 2007 it became compulsory for landlords to protect deposits in relation to residential assured shorthold tenancies, created on or after this date, within a government-authorised tenancy deposit protection scheme.
This legal requirement was introduced by Section 213 of the Housing Act 2004 and aims;
- to protect landlords if their tenant were to cause damage to the property or vacated without paying rent.
- to protect tenants, as they allow tenants to obtain their deposit back at the end of the tenancy, providing they are entitled to do so.
In England and Wales, deposits can be registered with any of the following government-authorised schemes:
- Deposit Protection Service (DPS),
- Tenancy Deposit Scheme (TDS).
Section 213(3) of the Housing Act 2004 requires landlords;
- to comply with the initial requirements of the authorised scheme and register the deposit within thirty days of receiving it.
- to provide their tenant with a copy of the deposit protection certificate.
- to supply their tenant with prescribed information, which is important guidance regarding the deposit protection scheme they have used and details of the steps that should be taken in the event of a dispute.
It is important to note that the necessary prescribed information will vary depending on which scheme is chosen to protect a deposit, therefore it is crucial that the landlord checks and understands what information they are required to provide to their tenant.
What happens if a landlord fails to protect a deposit or fails to protect it within thirty days?
If a landlord fails to register a tenant’s deposit within thirty days of receiving it, as required by Section 213(3) of the Housing Act 2004, they have breached tenancy deposit protection rules. This would allow the tenant to take legal action and claim financial compensation of one to three times the value of the deposit. Additionally, the court may order that the landlord is to protect the deposit or return it to the tenant in accordance with the specific scheme’s procedures. Unfortunately, late compliance is not a defence therefore any claim made where the deposit has not been dealt with correctly is likely to succeed.
Issues often arise when a landlord wants to evict their tenant but cannot do so because they have failed to abide by the law relating to protecting deposits. If a landlord either fails to protect the deposit under one of the three government-authorised tenancy deposit protection schemes or fails to provide the tenant with the correct prescribed information within thirty days of receiving the deposit, their rights are highly restricted. As a result, a landlord could face court action or be prevented from regaining possession of the property.
Our specialist landlord and tenant lawyers can advise you in relation to tenancy deposits and related disputes, in addition to a wide range of potential landlord and tenant matters. We understand the complex nature of these matters and can offer pragmatic help and guidance.