The Devil is in the Detail

by Mary Latham

11:59 AM, 5th December 2011
About 9 years ago

The Devil is in the Detail

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The Devil is in the Detail

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

Mary Latham

11:49 AM, 11th March 2012
About 8 years ago

Thank you for your kind words Paul.  The reason that I do keep pushing this message is that every time I meet landlords they are shocked about these changes.  So many landlords do not use the www and seem to live in a bubble, not knowing that something has changed until a landlord gets caught out and the case makes the press.

April is going to be an  interesting month between the deposit changes and the EPC changes alone but those who read the articles on P118 will know how to cover their backs.

dismayed landlord

16:55 PM, 15th March 2012
About 8 years ago

I am reading this with some concern - I have two tenancies placed with the DPS but the lettings agent submitted them therefore this is the first i know or the ruling '' The tenant, and any other person who has provided the deposit, given the prescribed information must be and copy of the Deposit Protection Certificate within 30 days of paying the deposit – up from 14 days'' I was never mentioned to me as as I have other deposits held with Agents own schemes I have never had any reason to question it.  and before anyone jumps on me for not keeping my eye on the ball, I agree but as far as i was concerned as long as the deposit was passed to the DPS within 14 days all was well as I believed they would inform the tenant. I ave checked the DPS site now and note that they pass details to the tenant but still there is a need for my intervention (i think!) and further more, if I have not issued this i have until the 5/4/12 to retrospectively do so. I note also that the terms and conditions of the DPS scheme are 12 pages long - not exactly a green piece of documentation. add to this the potential confusion of who else may be an interested party (who may have or may not have have provided the deposit money)- and this would be a useful argument for a tenant to make mischief, would it not? 

19:01 PM, 15th March 2012
About 8 years ago

It is a personal choice but I hold the deposit monies  it is the only way you can guarantee that the monies have been protected and that you have them in your bank account.
It does not matter who you use for protection if the LA or whoever does a runner with your monies YOU are still liable to the tenant.
Therefore I hold the deposit monies via mydeposits and I think there has been a newcomer to this scene which also allows  the LL to hold the deposit monies.
The full deposit info is on this site posted by Mark but I can't remember where.
I would not trust a LA with deposit or rental monies as they are not fully regulated yet and you have to find one which does meet relevant minimum requirements generally by being a member of ARLA.
The other thing you need to ask yourself is do you really need a LA to manage theings for you, if so then fine, if not , you can do it perfectly well yourself, there is loads of free stuff to help you manage and of course this site is brilliant for advices and info from industry professionals and also LL like you.

Mark Alexander

19:09 PM, 15th March 2012
About 8 years ago

Is this the article you are referring to Paul? 
http://www.property118.com/index.php/comparing-tenancy-deposit-protection-costs-for-landlords/23973/

Thanks for your kind words regarding the website too.

Mary Latham

22:50 PM, 15th March 2012
About 8 years ago

Grahamrann You have not done anything that many other landlords have not also done and this is why I have kept on and on and on about this.  It is a pain but it must be done and at least you have found out in time.

You are right none of us must give a tenant a chance to "make mischief" nore to get 400% of their deposit from a landlord who has just made a small clerical error

Mary Latham

18:25 PM, 17th March 2012
About 8 years ago

I have just left a couple of really good landlords who have been targetted by a serial bad tenant.  They were relying on Section 21 to get him out and did not realise that their notice was invalid because they had not given the tenant the protection certificate and prescribed information and the S21 would not expire until 25th April.  They now have the opportunity to correct their error just in time.

14:30 PM, 18th February 2013
About 7 years ago

Yes it was only your extremely timely advice re third parties deposit  having to receive a DPC aswell that made me check the site.
I don't think I will have any issues but the fact that I have actually had to follow your advice when I was completely unaware of it before you mentioned it, is extemely gratifying.
It just goes to show that forums such as this are genuinely worthwhile and not just just people 'shooting the breeze'
Well done to Mark for having the facility for us,
this is what social networking is all about.

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