19 March 2010 by Yezdan Izzet

Scheming Deposits…

Most residential properties which are let on short term tenancies now qualify as Assured Shorthold Tenancies, yet it is surprising that so many landlords are unaware of the statutory requirements relating to rent deposits.

Since 6 April 2007 any rent deposit received by a landlord pursuant to an Assured Shorthold Tenancy must be paid into a Tenancy Deposit Scheme (‘TDS’) and the tenant must be given certain prescribed information (including details of the scheme that the deposit is paid into, what to do in order for the return of the deposit, what to do if there is a dispute over the deposit etc.) within 14 days of receipt of the deposit.

The TDS is a government scheme which was set up for the purpose of safeguarding deposits and for facilitating the resolution of any disputes arising in connection with the deposits. At present there are only 3 authorised providers of the scheme, the details of which you can find at http://www.direct.gov.uk/en/TenancyDeposit/DG_066391

There can be huge consequences for a landlord who fails to pay a deposit into a TDS and provide the tenant with the prescribed information, in particular:

  • The Housing Act 1988 states that where a tenant applies to Court (on a landlord’s failure to pay into a TDS), the Court must order the landlord to pay to the tenant a penalty equal to 3 times the deposit amount!
  • The landlord cannot serve a Section 21 Notice to terminate a tenancy at any time when the deposit is held otherwise than in accordance with an authorised scheme. This is vital as a Section 21 Notice is the only basis on which a landlord can obtain possession which does not require any fault on the tenant’s part, it merely gives the tenant 2 months notice to vacate the property prior to issue of possession proceedings.

As a relatively new area there was no definitive case law suggesting whether or not the landlord’s failure to pay a deposit into a TDS and give the prescribed information within 14 days was a “once and for all offence.”

Finally, in the recent case of Draycott & Anor v Hannells Lettings Limited (t/a Hannells Lettings Agents) 2010 the Court of Appeal has shed some light on the position. In this case it was held that as the deposit was placed into a TDS and the tenant was given the prescribed information, albeit after the 14 day requirement, the Court could not impose a penalty as the deposit was protected before the tenant commenced proceedings for payment of the penalty against the landlord and the landlord’s agent.

The case was based on a specific scheme so whether the same rules would apply to the other two schemes is unclear. However, it does seem to suggest that a landlord can rectify non-compliance and may be able to avoid the statutory penalty and even serve a valid Section 21 Notice as long as proceedings have not been commenced. In any case in order to avoid the risk of litigation and a penalty, landlords are advised to ensure that they protect deposits and provide the prescribed information within 14 days of receipt.

26 February 2010 by

Achy breaky … lease

The valid exercise of a break clause is always important to parties to a lease but in the current climate, where good tenants are invaluable to a landlord, even more so.

5 March 2010 by Sarah Davies

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With spring and the promise of longer days approaching, you may be thinking about getting outdoors and into the garden. It may well be a place for fun and relaxation, however, there can be many legal pitfalls lurking in the bushes…

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