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.