Protecting Tenancy Deposits and the Deregulation Act 2015
26th Oct 2010

Protecting Tenancy Deposits and the Deregulation Act 2015

If a landlord lets a property on an Assured Shorthold Tenancy, on or after 6th April 2007, and takes a deposit from the tenant as security against non-payment of rent, damage during the tenancy or the performance of any other of the tenant’s obligations or liabilities, that deposit must be protected in a Government-authorised protection scheme.

If a landlord lets a property on an Assured Shorthold Tenancy, on or after 6th April 2007, and takes a deposit from the tenant as security against non-payment of rent, damage during the tenancy or the performance of any other of the tenant’s obligations or liabilities, that deposit must be protected in a Government-authorised protection scheme.

If the landlord does not protect the tenancy deposit or does not give the tenant certain information about the protection of their deposit it will not be possible to use a section 21 notice to get possession of the property at the end of the tenancy. Any section 21 will be unenforceable unless the deposit has been repaid in full (or with agreed reductions), or following a tenants claim being decided, withdrawn or settled.

In addition, if the tenant believes at any time during the tenancy that their deposit has not been protected or he has not been given the necessary information about deposit protection he can take the landlord to court. If the landlord is found guilty the court will order him to pay the original deposit amount either to the tenant or into the custodial deposit scheme. In addition the court will order the landlord to pay between one and three times the deposit amount to the tenant as a penalty. It is no longer fixed at three times the deposit. The penalty would be payable even if the landlord complies with the scheme requirements before the hearing of the tenants claim.

The tenant is able to apply to the court for a penalty payment at any time during the tenancy, even after the tenancy has ended. They can do this up to 6 years after they have moved out, meaning the landlord is at risk for all that time, if they have not protected the deposit, and sent the required information to the tenant, within the 30 days.

Several deposit protection schemes have now been authorised by the Government, Links can be found in the Additional Resources section: 

  • MyDeposits (Insured and Custodial)
  • Deposit Protection Service (Custodial and Insured)
  • Tenancy Deposit Scheme (insured)

(Capita Tenancy Deposit Protection no longer accepts new deposits and is closing on 13 September 2014).

The landlord must protect the deposit within 30 days of receiving it. After the 30 days, the landlord can still protect the deposit, but will no longer have any defence to a claim by the tenant for the penalty payment. Further, the landlord cannot serve a valid section 21 notice until the deposit has been returned to the tenant OR a court has already adjudicated on the late protection.

If he is using the custodial scheme he protects the deposit by handing it over to the scheme.

Landlords who use one of the insurance-based schemes must notify the scheme that they have taken a deposit and pay a fee to use the scheme. The landlord can then hold onto the deposit throughout the tenancy.

In June 2013, a court of appeal in the Superstrike Ltd v Marino Rodrigues case threw doubt on whether Statutory Periodic Tenancies that have been created by default at the end of the initial term of an Assured Shorthold Tenancy, are new tenancies.

 

The Deregulation Act 2015 contains important changes to deposit protection legislation and now clarifies the issues created by this and another case, Charolambous vs Ng. Below is a summary of the implications of the Deregulation Act 2015, and what you need to do in order to comply:
 
Implications for deposits taken before 6th April 2007
 
• If you took a deposit on an assured shorthold tenancy (AST) before 6th April 2007 and you continue to hold that deposit against a statutory periodic tenancy which also started before April 2007, you do NOT need to protect the deposit.  However, if you wish to gain possession of the property using notice under Section 21 of the Housing Act 1988, the deposit must be protected and the Prescribed Information issued to the tenant prior to you serving the Section 21 notice.  You will not face any financial penalties for non-protection of the deposit. 
• If you took a deposit on an assured shorthold tenancy before 6th April 2007 and you continue to hold that deposit against a statutory periodic tenancy which began after April 2007, if you have not already done so you must protect the deposit with an authorised scheme either:   
• by the 23rd June 2015, or; 
• before a court decides on proceedings under Section 21 of the Housing Act 1988 (possession) or; 
• before a court decides on proceedings under Section 214 of the Housing Act 2004 (failure to protect a deposit)
whichever is the earlier.   
NOTE:  If the tenancy no longer exists or the deposit is no longer held by you, and you did not protect the deposit or issue the Prescribed Information to the tenant, the deposit protection requirements are deemed to have been complied with. 
Implications for deposits taken since 6th April 2007  
 
• If you took a deposit on an assured shorthold tenancy after 6th April 2007 and correctly protected and served the Prescribed Information to the tenant, you do not need to reissue the Prescribed Information to the tenant on future renewals of the AST or where the AST rolls into a statutory periodic tenancy so long as the tenancy details have not changed (i.e. landlord, tenant and property information) and the deposit remains in the same tenancy deposit protection scheme. 
NOTE:  mydeposits will still require you to re-protect the deposit at the start of each tenancy renewal and pay the relevant fee. You do not need to re-protect the deposit if the tenancy rolls into a statutory periodic tenancy so long as you have notified them.  
   
Agent details on the Prescribed Information
 
The Deregulation Act also clarifies that where an agent has protected a deposit on behalf of a landlord, the agent’s contact details can be provided within the Prescribed Information.  
   
 
In summary:
The law is relevant to any deposit currently held on an assured shorthold tenancy. It assists landlords who did not re-protect deposits or re-serve Prescribed Information when a tenancy was renewed or when a statutory periodic tenancy arose. Tenants must still be given revised Prescribed Information about their deposit if there is a change in tenant(s), landlord(s), premises or the deposit protection scheme.
If as a result of the Deregulation Act a tenant loses a claim relating to deposit protection or loses their challenge to a section 21 notice, the court will not order the tenant to pay the landlord’s costs – as long as the tenant started their court case before 26th March 2015.