Tenancy Deposit Protection legislation changes at midnight on 5th April DO NOT GET CAUGHT OUT!

by Mary Latham

16:00 PM, 12th March 2012
About 8 years ago

Tenancy Deposit Protection legislation changes at midnight on 5th April DO NOT GET CAUGHT OUT!

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Tenancy Deposit Protection legislation changes at midnight on 5th April DO NOT GET CAUGHT OUT!

I am going to keep it simple I have written two articles with full details but here is the short version including TWO NEW WARNINGS

  • A tenant’s deposit must be protected within 30 days of taking it for all deposits taken on or after 6th April.
  • Existing deposits that were taken more than 30 days ago must be protected by midnight on 5th April.
  • When you sign up a new AST and rollover a deposit this is deemed to be a new tenancy and the deposit must be protected again if it is covered by one of the insured schemes.
  • Any monies taken to cover loss of rent or damages or losses to landlords property is a deposit regardless of the name it may be given.
  • A guarantee or bond is not a deposit unless money changes hands and does not need to be protected.
  • A deposit protection fee may not be charged to the tenant but an admin fee can be charged for unspecified administration services.
  • The protection fee is tax deductible.
  • The deposit protection certificate and prescribed information must be given to the tenant(s) and to any third party who provided the deposit.
  • A Section21 notice will not be enforceable unless:
  1. The deposit was protected within 30 days or has been returned to the tenant prior to the issue of the S21 Notice
  2. The deposit protection certificate and prescribed information was given to all tenants and any 3rd parties involved

TWO NEW WARNINGS

  • If you are using the custodial scheme make certain that you give them valid contact details for the lead tenant, failure to do so meant that last autumn according to the DPS website –
  • “Over 8,000 deposit repayments valuing almost £5 million are waiting for the response of the lead tenant before the deposit can be repaid”.

I don’t imagine that these tenants expected their deposits to be returned, otherwise I would have thought that they would be chasing DPS and it is fairly safe to assume that much of this money is due to landlords.
One of the mistakes often made by landlords who let to students is to give the DPS the students’ university email address which is closed when the student graduates.

  • The deposit must be protected in the name of the registered property owner (landlord) unless you are registered with one of the schemes as an Agent

Last week I received a call from a landlord who has 150 deposits protected with one of the insured schemes. During a dispute it became known to the scheme that the deposit in question was protected in the name of the landlord’s son after they had spot checked at Land Registry! The scheme has said that this deposit protection is invalid. It appears that many of this landlord’s deposits were protected in his sons name and now they must be newly protected before midnight on 5th April otherwise they will fall foul of the legislative changes. Ouch!

There are many potholes in the road for landlords, but tenants deposit protection is about to become a minefield and I hope you will forgive me for banging on. I will only post further warnings if I become aware of new issues.

The articles where more details can be found are here

The Devil is in the detail

Further warnings to landlords about tenants deposit protection



Comments

Mary Latham

14:13 PM, 16th March 2012
About 8 years ago

Stevemasters There are only really two options to carry an AST forward. 1. Do nothing and it automatically becomes a Statutory Periodic and all the terms and conditions and deposit protection of the original contract remain.  2. Issue a new AST and this will legally be a new tenancy and must be dealt with as such.

If your deposits are lodged with DPS it is worth just sending the relevant paperwork again even with a SP
Yes I know it's a pain but that is the law

Steve Masters

9:00 AM, 17th March 2012
About 8 years ago

Mark, Just to put the record straight, this will be my misunderstanding about 'extending' an AST not my agents. When they handle deposit protection with TDS I'm sure they do it properly. I have elected to handle deposits my self through DPS and myDeposits and it seems I still have things to learn. I will discus the whole topic with them asap.

Mary, that is probably what I shall do, it is a pain. Nanny state interference, well meaning but poorly implemented!

7:17 AM, 20th March 2012
About 8 years ago

SERVICE OF DEPOSIT CERTIFICATE AND INFORMATION FOR TENANTS.
Having read the relevant sections of the legislation it seems to me that:
1. In the case of a joint tenancy the deposit certificate and Information for Tenants need only be served on one of the tenants. I cannot see anything in the legislation or scheme rules to defeat what I believe is the common law rule that service on one joint tenant is sufficient service on all joint tenants. (I serve the documents on the lead tenant only as he is also required to sign a copy of the certificate to verify correctness of the registration under the scheme -mydeposits- rules.)
2. Where someone other than the tenant provides any part of the deposit, service of these documents need only be effected on that person if that person actually pays direct to the landlord or landlord's agent the deposit or part of it: if that person pays the deposit or part of it to the tenant rather than the landlord and it is the tenant who actually pays the landlord then there is no need to serve the documentation on anyone other than the tenant. I believe the relevant legislation is s.213(5) and (6) and (10) of The Housing Act 2004 (as ammended by The Localism Act 2011).

Robert Cummings

Steve Masters

17:40 PM, 20th March 2012
About 8 years ago

regards renewed or 'extended' tenancies:

I have spoken to DPS who run a custodial scheme and they tell me I do not need to issue the paperwork again, the tenancy may be new but the deposit is protected continuously.

myDeposits who run an insurance backed scheme say that not only do I need to pay another protection fee but I also need to re-issue all the 'prescribed information' again as it constitutes a new deposit protection.

Neither service make it clean on their websites what to do about the 'prescribed information', I have asked them both to add this information.

14:38 PM, 3rd April 2012
About 8 years ago

I do not, nor have I taken a tenant deposit since the new legislation was brought in. Obviously you need to vet your prospective tenants very well and get someone to give a guarantee for payment performance by the tenant.

This also give you a letting advantage over agents where it often costs the new tenant around £1000 to move in as opposed to one month up front and a guarantee.

It also means that in the event you have to issue a section 21 possession notice you do not have to worry about falling foul of the deposit laws which  (as usual) protect the (poor innocent) tenant and penalise the (rogue) landlord.

I know of another landlord who gives his tenants a choice. Example: £80 per week with a deposit. £90 per week with no deposit. Guess what they always choose?.

Also, if you are running a property business, bad debts written off can be tax deductible.

You need to considerer every angle applicable to yourself, including the "hassle" factor of dealing with tenant deposits.

At at the end of the day is it really woth it???

Mary Latham

19:34 PM, 3rd April 2012
About 8 years ago

Interestingly a landlord told me in a seminar today that he too has increased his rent and taken tenants on a no deposit basis.

As you say we all need to look at every angle and make a business decision.

I try always to return 100% of my tenants deposits but I like to hold something of theirs that they want back because they are holding something of mine that I want back.  Whatever works for each of us is the best option

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