Landlords – Deposit laws will bite you if you don’t do it right

Landlords Need to be Aware of Deposit Legislation

In Property Eye today Rosalind Renshaw reported an industry scandal about deposits. In fact four in every ten landlords who called Landlords Action’s legal helpline have broken the law by failing to protect tenants’ deposits.

Since 2007 Landlords and Letting Agents have been required by law to protect tenant’s deposits using a government-recognised scheme within 30 days of the tenancy start date. In addition there is a requirement to issue the tenant with Proscribed Information so that they know where their deposit is, and how to retrieve it at the end of the tenancy.

The Penalties for Not Protecting Tenants’ Deposits

Where the deposit is not protected Landlords can face penalties of up to three times the value of the deposit, which is then awarded to the tenant. Less well known is that landlords may still face penalties even if they used an agent, if their agent failed to comply with the legislation.

In addition to the possible fines, where a landlord wishes to gain possession of a property through Section 21 they will be unable to do so unless and until the deposit is legally protected. A court order for possession cannot be granted without proof that the deposit is protected in a recognised scheme, and may be refused if the deposit was not protected when it should have been.

The founder of Landlord Action, Paul Shamplina commented: “There are too many landlords that still do not know enough about being a landlord and their responsibilities.

Many are failing to comply with deposit protection rules and this is having a knock-on effect when landlords wish to evict through Section 21. The simple fact is, ignorance will not solve the problem.”

Landlord Action are seeing more landlords contacting them because of legal action being taken against them by tenants for not protecting the deposit. Tenants appear to be becoming increasingly aware of the legal situation where many landlords are still in the dark.

The problem is that many landlords will struggle to find a solicitor to act for them because the legislation is so straightforward, and there is no defence for not protecting the deposit. There is a really clear guideline for landlords about tenants’ deposits on the Government website.

The Property Eye article goes on to quote Eddie Hooker of MyDeposits who raises the point that not only should the deposit be protected but the tenant should be served with the Prescribed Information. He says “The majority of legal cases we see surround the incorrect issuing of the Prescribed Information, or failing to issue it at all.”

Is My Deposit Protected?

Riley Marshall ensures their clients stay within the law to protect their interests. However we are aware that some landlords do not know their obligations in regard to deposits. In fact we highlighted this issue in 2012 in our blog post – How Secure is Your Deposit? You can read that article here.

Don’t risk falling foul of the legislation on deposits. If you are unsure of the status of your deposit you can use this handy tool on the Shelter Website which will check whether your deposit is protected. You just need your postcode, tenancy start date and the amount of the deposit.