Get ready for new deposit protection rules
Published 20/02/2012 Tough deposit protection rules start soon that close loopholes that let landlords escape fines by returning money to tenants on the steps of the court.
After judges threw out a string of claims from tenants, the government has revised tenancy deposit protection law.
The new rules start from April and affect deposits already held by landlords and letting agents as well as new deposits.
The new rules say:
- Landlords must protect deposits held under assured shorthold tenancies within 30 days of receiving the money
- Tenants and anyone else paying towards the deposit must be given information about the scheme protecting the deposit and the landlord’s contact details within 30 days of handing over the deposit
The new rules call for landlords to deposit payers a copy of the protection scheme’s tenant leaflet as well.
- Failure to comply with either requirement within 30 days will trigger a statutory penalty of between one and three times the deposit amount. The tenant has no limit on claiming the penalty – this leaves a window of six years after they have left, even if the deposit is refunded in full.
Renters cannot claim penalties for tenancies ending before the start of the new rules.
Landlords who do not keep to the rules lose their rights to issue section 21 notices if the renter breaches a tenancy agreement or is in arrears.
The rights can only be restored by returning the deposit or a court order – and even then the tenant can still claim the penalty for a landlord failing to comply with the rules.
Existing deposits will be treated as new deposits on the first day of the new rules, giving landlords up to 30 days to bring them under protection without penalty.
Landlords are advised to keep tenancy agreements, deposit protection details and other related documents for six years – which also ties in with keeping paperwork for HM Revenue & Customs by property investors.
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Mary Latham says:
20/02/2012 at 19:45
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Paul Barrett says:
20/02/2012 at 20:27
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Mark Alexander says:
20/02/2012 at 20:39
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Confused-of-Wales says:
23/02/2012 at 09:04
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Mike Barnes says:
23/02/2012 at 09:24
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Mike Holmes says:
23/02/2012 at 10:22
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Alan Stewart says:
23/02/2012 at 11:29
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Mary Latham says:
23/02/2012 at 15:12
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Mark Alexander says:
23/02/2012 at 15:50
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Mike Barnes says:
23/02/2012 at 17:14
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Stevemasters says:
23/02/2012 at 20:08
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Mary Latham says:
24/02/2012 at 15:15
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Mary Latham says:
24/02/2012 at 15:19
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Confused-of-Wales says:
27/02/2012 at 11:04
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Mary Latham says:
27/02/2012 at 12:39
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Mike Barnes says:
27/02/2012 at 16:44
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Martin Law says:
05/03/2012 at 13:06
Leave a commentOi! I have already said all this here http://www.property118.com/index.php/the-devil-is-in-the-detail/21710/
Imitation is the finest form of flattery
Any landlord who has an unprotected deposit needs to protect it NOW it will be too late after 1st April if you have held it for more than 30 days.
These new regs are going to catch a lot of LL and accidental LL out.
Of course tenants who are not happy with treatment by a LL who is; let us not a regular LL will wait for the initial AST six months, vacate and submit a claim; meaning their 6 month tenancy will have cost them 2 months rent.
The LL won’t be able to apply any negative information about the tenancy as the tenants will have complied with their tenancy terms.
Do this twice a year and as tenant you can live for a year on 4 months rent.
So tenants will be hunting out ignorant or rogue LL looking to take them to the cleaners.
Hi Mary
Looks like we’ve been caught with our trousers down here doesn’t it? LOL
We employ a professional journalist to write several of our news coulms and Jack has obviously not picked up on the fact that duplication has occurred here. Never mind, this one has hit the Google News and your comment links back to your far more informed and well debated article so people can hop over to that if they want more information
Does anyone know if this applies to deposits that pre-date
the existing scheme and as such do not have to be protected under the current regulations?
i.e. AST pre-dating 2006
The previous rules were that deposits held before the deposit protection rules came into force did not have to be protected in an approved scheme.
Any idea what the position is under these new regulations for such deposits?
It didn’t take long for this bureaucratic exercise to start growing more heads, I knew it would as soon as it was introduced. That is why I gave up on taking deposits and just introduced two months rental payment in advance, admittedly it is easier with student lets because I go through all the rooms in August and replace any damaged stuff,carpets etc as a matter of course, it is largely second hand furniture, so the cost is minimal. You still get the odd bolter, but usually their Guarantor will stump up, if not,then it is easier to just lump it rather than involve yourself with a lot of palaver with the deposit holder. Who needs all that grief? Move on and get you life back.
Is it better to return the deposit to the tenent and not bother with the new legislation.. and is this legal.
Any deposit taken prior to the Housing Act 2004 kicking in does not have to be protected until a new AST has been signed since, in this case the new AST constitute as new tenancy and the deposit which was carried forward must be protected.
Any deposit taken since the HA 2004 kicked in must be protected NOW because after April 1st these deposits will be subject to the change in the rules that say we have only 30 days from the date that we take the deposit or transfer the deposit to a new AST in which to protect it. We will NOT have 30 days from April for existing tenancy ONLY for new tenancies or transfered deposits where a new AST has been signed after April 1st
There is no legal requirement to take a deposit but any monies taken to protect us against losses or damages would be considered to be a deposit regardless of what we call it. Monies taken to hold a property pending signing of contracts should be receipted as Non refundable retainers NOT deposits to hold. If these monies become part of the deposit once the AST is signed the 30 day clocks starts ticking on that date and the monies must be protected.
If we return the deposit to our tenants in full during the tenancy we can serve a Section 21 after that date but a tenant may still have a case for non protection during the time it was held if it is taken after April1st. The case law that enabled landlords to protect a deposit late but before a court appearance will not stand after April 1st.
In summary
If you take monies to protect yourself against losses or damages protect it within 30 days
If you take rent in advance DO NOT take more than 1/6th of the annual rent
If you take a non refundable retainer receipt it clearly
Do not serve a section 21 which predates the deposit protection date
Make certain that you provide the tenants and anyone else who has provided the deposit with the deposit protection certificate and prescribed information within 30 days
If you take an admin fee receipt this as a non refundable admin fee and do not specify what it covers other than “setting up the tenancy”
I have given more information on all these points in my various articles on this site. You will also find many questions answered and discussions around this issue on those threads.
Mary mega sulking because she has already said all this on those discussions and in particular on the Devils in the Detail post
Hi Mary
You have indeed said all of this before but nowhere near as succinctly. This is a brilliant post and makes the rules very clear without having to read through all the questions, answers and chit cat in the comments section of the other thread. With your permission I would like to run this commentry as a seperate article in a weeks time to keep the subject fresh in all landlords minds. I’m happy to credit the article back to you or if you prefer to include it with something fresh I’m happy either way. Not all readers see every article and every comment so it’s essential that we repeat vital messages such as this one. News articles also go straight into the Google News feed which attract all sorts of interest from people who may never have engaged with Property118 before too.
Thanks for this
I have been advised by the DPS that if a deposit was taken before the HA 2004 kicked in and the deposit is increased after the HA 2004 kicked in, then the entire deposit must be protected, not just the increase, even though there is no new AST.
I protect all my deposits and give my tenants all the required details… or so I thought !!!!!
After reading this and Mary’s original article I realised that I had only given my tenants the deposit protection details and the not the full Prescribed Information pack.
For myDeposits this is the “Deposit Protection Certificate” AND the “Information for Tenants” booklet.
For DPS this is the “Prescribed Information” form that needs to be filled out AND the DPS “Terms and Conditions”.
I bet I’m not the only LL who has overlooked his, so thank you Mark and Mary.
In this day and age of internet everything, do we know why the scheme administrators haven’t automated this for us? How hard would it be for them to independently provide all this information to the tenant(s) and thus ensuring protection to both tenants AND landlords. Could we lobby them to close this potential loophole?
Good point Mike. In my opinion anything if we do anything other than allow the AST to become a Statutory Periodic and not alter the deposit in any way we should check to see if we need to do a new protection.
Steve I hate it when good landlords get “caught out” by detail and Im really pleased that you are now covered.
I don’t see a time when the scheme administators take on this task because it is the legal obligation of a landlord but I agree that they could automate their system to help us. How difficult would it be to make the prescribed information pages 2 and on of the Protection Certificate so that a landlord automatically prints it for his own records and those of his tenants?
So the Deposit Protection started on 6 April 2007, so any AST started before that date that have become Statutory Periodic and no alterations have been made to them, are still NOT included in this??
That is correct for England you need to find out if Wales is different.
I use DPS and include the Prescribed Information as a section of the Tenancy Agreement (this is because I hand over the Agreement in exchange for the deposit and first month’s rent). All the information requires is available at that time, and signing the agreement meets the requirements of 2(g)(vii) of The Housing (Tenancy Deposits) (Prescribed Information) Order 2007. I also include a copy of the DPS terms and Conditions stapled with the Agreement.
This avoids the possibility of the tenant claiming that the information was not provided and reduces the number of items I need to get the tenant to sign and to be kept in my files..
Hi Mary,
what is the situation with non-AST residential tennancy agreements. Is there still a requirement to protect deposits?
Thanks
Martin