Dealing with Deposits

by Tessa Shepperson

12 months ago

Dealing with Deposits

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Dealing with Deposits

This is the second post in my 2017 Legal Update series.

Today I am looking at Tenancy Deposits

Tenancy deposits were first introduced in April 2007 and ever since then all landlords have had to:

  • Protect their tenants’ deposit within a government authorised scheme within a time limit and
  • Serve ‘prescribed information’

Although many deposits have been protected and dealt with perfectly satisfactorily under the rules, the legislation proved to be most unsatisfactory and has had to be amended twice.

Frankly if they had intended to mess it all up, the Parliamentary Draftsmen could not have done a better job!

The most recent changes came with the inappropriately named ‘Deregulation Act 2015’ which also brought in changes to section 21 which I will be explaining later in this series.

This is how it now works:

Protecting the Deposit

When you take a deposit, you need to protect it in a scheme within 30 days of receipt of the money.

There are two possible problems areas here:

  • Deposits that are paid a long time before a tenancy starts, and
  • Situations where landlords allow tenants to pay deposits by installments.

So far as the early deposits are concerned – the best advice is to just protect them within 30 days.

Some people assume that as the tenancy has not started yet there is no AST to (as it were) hang the need to protect on. However as soon as the tenancy is created you will instantly be out of time. So best to just bite on the bullet and protect.

So far as accepting deposits by installments is concerned this is a VERY bad idea. Each and every installment must be protected within 30 days of payment and many landlords have got into trouble by waiting until all payments are paid. If you must accept installments its best to do this with the rent rather than the deposit.

Serving the Prescribed Information

Prior to the Deregulation Act we had a ridiculous situation (following on from the Superstrike Case) where landlords had to keep serving prescribed information forms whenever the tenancy was renewed, e.g. as a periodic tenancy.

Thankfully the Deregulation Act changes stopped this nonsense. However, you still need to be careful to serve the notice within time.

Remember that it is the information that is prescribed not the form – there is no actual prescribed information form. So, you need to be careful to ensure that all the information is actually provided.

Serving a copy of the certificate and your scheme’s leaflet will satisfy most of the requirements but not all. For example, you also need to tell the tenant the clauses in your tenancy agreement which set out the deductions you are entitled to make from the deposit.

For this reason, it is best to use a properly drafted legal form so nothing gets overlooked – suitable forms are provided by TDS and the DPS and I also have one for my Landlord Law members.

What if it all goes wrong?

The problem about failing to comply with the rules is that you cannot then serve a valid section 21 notice until you are compliant – which includes refunding the money to the tenants.

If you are ever in this situation, I have prepared a Legal Kit which you can read about below, which explains the law and gives step by step guidance.

Tenants are also entitled to bring a claim for up to 3x the deposit sum if you breach the rules. So, it is best to comply so they have no chance to do this.

Further information:

Probably the best source of information is the website for your scheme.  This will have guidance, the scheme terms and conditions and helpful articles.  The schemes also have free telephone advice lines – you can find the number from your scheme website.

The websites are

On my Landlord Law site, I have a lot of help for members on deposit issues, including a ‘compliance checker’ trail you can follow to see if you have complied with the rules, a long article explaining the prescribed information and a prescribed information form you can use.

Members can also ask me ‘quick questions’ in the members forum area.

You can find out more about Landlord Law here.

If you forget the protect the deposit in time, my Deposit Error Repair Kit has step by step guidance to help you comply with the law and serve a valid section 21 notice.

Next time I will start looking at section 21 and the complicated rules that now apply.

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

Additional course below:

Landlords – if you want to avoid legal problems, penalties and fines, this online course is just the job Please Click Here



Comments

Gunga Din

12 months ago

Recently started a tenancy and protected the deposit. The tenant now proposes to get a dog, so I require extra "pet damage deposit". How should I deal with depositing this?

Many Thanks - Gunga Din

Romain Garcin

12 months ago

Reply to the comment left by Gunga Din at 28/08/2017 - 11:22
Hi Gunga,

You would need to proceed as with a 'normal' tenancy deposit by protecting this deposit within 30 days of receiving it.

toona rama

12 months ago

Hi,
What is the best way to 'prove' the tenant has received the prescribed information/certificate within the 30 days (or even at all)? Just in case the tenant subsequently denies receipt and it is your word against theirs.

Tessa Shepperson

12 months ago

Hand it to them personally and get them to sign and date a copy to confirm receipt. Or have an independent witness when the item is hand delivered to them. Keep a record of the date, time, and method of service.

Don't send it by post as there is no way you can prove receipt (unless the tenant tells you that they have got it).

Recorded delivery is OK if they sign for it but often tenants don't accept delivery or fail to collect the item if it is taken back to the mail office. Personal service is always best.

Any Landlord Law members reading this will find a long article on service of documents in the member's area here: http://www.landlordlaw.co.uk/member/general-guidance-service-documents


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