The Devil is in the Detail

The Devil is in the Detail

11:59 AM, 5th December 2011, About 11 years ago 107

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The Localism Act 2011 is another heavy piece of legislation and you might be forgiven for missing a very important detail. It has been overlooked in several articles that I have read this week, but the courts will not forgive you so you’d better read on.

In the Housing Act 2004 it became unlawful to take a deposit from a tenant and not “protect” it through one of the 3 schemes that have Government contracts. The Housing Act 2004 included Tenants Deposit Protection (TDP) because it was perceived that landlords were not treating tenants fairly when it came to stoppages at the end of the tenancy and therefore the tenant needed to be given the opportunity to have independent arbitration in the case of a dispute. The arbitration must be paid for and the landlord was given two options.

    1. Put the deposit into a custodial scheme where it is held, at no cost to the landlord or the tenant, until it is returned the end of the tenancy. The interest made on the monies lodged pays for arbitration

OR

  1. Pay an insurance premium of £30 and hold the deposit yourself. The insurer will pay for the arbitration

I won’t go into the details of Tenancy Deposit Protection (TDP) but you can find them all here.

This had not been updated at the time of writing and the following statement at the top of that page is incorrect.

“There are currently no known outstanding effects for the Housing Act 2004, Section 212.”

The 2011 Localism Act, including changes made to this section of the Housing Act, can be found here.

These are the important changes made to the TDP legislation in this Act

  1. We now have 30 days in which to protect the deposit from the date on which it is paid to us by the tenant – this is increased from 14 days
  2. The legal penalties for not protecting a tenant’s deposit are now on a sliding scale, the minimum of which is the return of the full deposit (regardless of what a Tenant may owe you) up to a total of four times that amount. The court has the discretion to decide.
  3. The tenant, and any other person who has provided the deposit, must be given the prescribed information and copy of the Deposit Protection Certificate within 30 days of paying the deposit – up from 14 days
  4. If the deposit has not been protected within the first 30 days subsequent protection will not be legally compliant and a tenant may still take an action in the County Court, even after the tenancy has ended. The penalty may depend upon how long after the 30 days the deposit was protected.

The devil that is hidden in the detail is this

If you do not protect a tenant’s deposit within 30 days of taking it you will not be able to use Section 21 of the Housing Act 1988 to regain possession of your property at any time during the tenancy.

So say you want to remove a tenant from your property because you want to sell it (or for many other reasons) but the tenant is meeting all the terms of the tenancy and does not want to leave.

You did not protected the deposit within 30 days of taking it, so therefore-

You are stuffed

I have a couple of other warnings for you but I will let you digest that first.

*** Updated 7th December 2011 ***

This is the Link to the Localism Act Section 184 which relates to tenancy deposit protection

http://www.legislation.gov.uk/ukpga/2011/20/section/184/enacted

The details that I refer to are in

Sections 10, 11, 12, 13 and 2A

Given this situation what are the landlords option?

1. Do not take a deposit 

2. If you have missed the 30 day deadline you could give 100% of the deposit back to the tenant during the tenancy and this will enable you to serve a Section 21 notice if the tenant does not want to leave

3. You could try negociating with the tenant about any rent arrears, losses or damages and agree the amount to be stopped from their deposit and return the balance to them - during the tenancy - and then serve a Section 21 to remove them

4. You could try regaining possession using a Section 8 - with grounds - and hope that the court is not interested in the fact that you have not protected the tenants deposit within 30 days if this is used as part of a defence

YOU MIGHT TRY THIS 
Take a deposit and protect it under one of the three schemes within 30 days & give the prescribed information to the tenant within 30 days
 The date that these changes will take effect has not yet been announced but it looks likely to be April 2012


Comments

by

23:58 PM, 6th February 2012, About 10 years ago

Your're nothing if  not efficient!!
Just shows how your site provides advice about things that we didn't even know we  needed  to know!
It's good to talk!

by Mary Latham

17:24 PM, 12th February 2012, About 10 years ago

Landlord who are signing up new tenants need to read this because the change in law is happening in April for any tenancy signed after that date.

by

1:44 AM, 23rd February 2012, About 10 years ago

Why all the fuss, dont take a deposit at all, just have the tennant pay 2 months up front.

by Valerie Legenza

10:19 AM, 23rd February 2012, About 10 years ago

Hello,

What about deposits from other types of tenancy agreements which are not assured shorthold agreements? Are deposits taken under these contracts obliged to be protected?Martin

by

11:03 AM, 23rd February 2012, About 10 years ago

I've given up taking deposits, the chances of them being valid versus the risk of a claim. Tenants used to trust me with their deposits and my fair minded 'percentage of damage' reductions - now I trust to luck. Is this what the powers that be wanted ? Of course just like me you are at risk from the last quarter on (I get quarters upfront) and you loose that little bit of pressure that sub-consiously keeps them looking after the place and on their toes in the nicest possible way !

by

11:43 AM, 23rd February 2012, About 10 years ago

Have you read the Section 8 process and the Section 21 process; taking more than 1 month's rent in advance causes delays in utilising the Section 8 process and I believe also the Section 21 process.
There is also the risk of creating a premium tenancy.
No I have to say I like Mark Alexander's approach which is 1 months rent in advance and 1 month and 3/4in deposit leaving an amount of £150 in admin charges to pay.
So if £1000 per month in  advance rent; would mean £1850 in deposit with £150 in admin charges.
This avoids any question of either the deposit or the advance rent creating a premium tenancy.

by Mary Latham

15:19 PM, 23rd February 2012, About 10 years ago

I have posted this on the other thread but I want to repeat it here to be certain that landlords are clear whichever thread they read.  This is very important and I am concerned that it will catch many landlords off guard.  Please spread the word.

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 1stThere 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 summaryIf you take monies to protect yourself against losses or damages protect it within 30 daysIf you take rent in advance DO NOT take more than 1/6th of the annual rentIf you take a non refundable retainer receipt it clearlyDo not serve a section 21 which predates the deposit protection dateMake certain that you provide the tenants and anyone else who has provided the deposit with the deposit protection certificate and prescribed information within 30 daysIf 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"

by Mary Latham

12:20 PM, 10th March 2012, About 10 years ago

Landlords less than ONE MONTH to protect your unprotected deposits.

A landlord told me this week "I will protect them if I am taken to court, thats how it works" 

That is only how it works until midnight on APRIL 5TH after that if a deposit has not been protected and has been held for 30 days or more the landlord has broken the law and faces fines of up to 300% of deposit and the return of the full deposit. 

You may serve a Section 21 where the deposit is unprotected but the court will not enforce it unless the deposit was returned BEFORE the notice was served if it was not protected within the first 30 days

 TENANTS WILL CATCH ON TO THIS THROUGH WWW.

by

22:33 PM, 10th March 2012, About 10 years ago

Hi Mary; you must be quite hoarse by now; as you have been shouting for some time now what is going to happen regarding these changed deposit rules.
I don't think you could do anymore than you have done to make everyone aware.
If there is a Landlord out there that is not aware of these new regualation; nobody could ever accuse you of not trying your best to bring it to the industry's attention.
Well done for your hard work in striving to get this important message across to LL.
I have picked up some useful pointers from you and am now fully forearmed about these revised circumstances.
Thanks to you I don't see myself being caught out by some scussy tenant.
Let's hope that EVERY LL and LA is aware of what is about to hit; some hope!!?
How long do you think it will be for some clued up tenant gets a case into the county court system; I think only then will LL and LA wake up to the new reality for DPC's.
I reckon about 2 months after the revised regs come into force.

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