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

15:17 PM, 5th December 2011
About 9 years ago

Mark if you were a tenant and found out that your landlord had not complied with the changes made in the Localism Act might you not be tempted to stop paying your rent and wait for the landlord to take legal action under Section 8 of the Housing Act 1988. Would you not be tempted to then use as your defence

"This landlord is operating illegally because my deposit was not protected as required by law"

Could you imagine a judge saying

"Thats ok because I love landlords so much I will allow him to operate outside of law and I will use the law to protect his right to remove you from his property because you are £X,000 in arrears with your rent. Now here is a court order to leave the property"

I don't think so............

Mark Alexander

15:45 PM, 5th December 2011
About 9 years ago

I can also see another angle on this Mary.

What about all those landlords who mistakely believe they can outsource their legal responsibilities to agents?

We both know they can't but do they?

We both know that they will not be able to gain posession of their properties if their agents fail to protect their deposits but do they?

Mary Latham

16:47 PM, 5th December 2011
About 9 years ago

Mark you are steeling my thunder. I plan to get that clever man Jack to add to the oringinal post to warn landlords about other related issues and the point that you have made is one of them

Mark Reynolds

17:43 PM, 5th December 2011
About 9 years ago

I already have stolen your thunder 🙂 - Check the second thread I started and i think 3rd post down from us (CarolePierce) post here

http://www.facebook.com/groups/257812827583474/

talks about the landlords responsibility 🙂

Tessa Shepperson

8:06 AM, 6th December 2011
About 9 years ago

Just a quick note to say that under the new tenancy deposit rules, landlords WILL be able to use section 21 where they have failed to protect the deposit within the 30 days, if they pay the deposit money back to the tenant.

The rules will also allow them to offset the deposit money against rent arrears with the agreement of the tenant, and to use s21 after a tenants claim under s214 has been finalised.

JOANNE CHAPMAN

9:51 AM, 6th December 2011
About 9 years ago

I have several LHA tenants who often can't afford to pay me a deposit outright. I allow them to pay an enhanced rent for the first 6 months in order to build up their deposit. All my deposits are with the DPS who are now accepting incrumental payments for such circumstances, so in effect it is one deposit but built up over a period of time. I would be interested to hear if the localism act will have any bearing on this arrangement.

11:06 AM, 6th December 2011
About 9 years ago

It would help if Mary were to mention the relevant sections of the act. Trying to find anything in it is very difficult. It is also necessary to look at the status table because a lot of it is not in force yet.

9:23 AM, 7th December 2011
About 9 years ago

Does anyone know what happened when a Tenancy comes to an end and is then renewed and the Landlord,who trusts,and is very happy with the Tenant,pays the Deposit back,and issues a new Agreement.not charging any deposit.Can the Landlord be held accountable for the last Tenancy Agreement.??

Mark Alexander

9:43 AM, 7th December 2011
About 9 years ago

Good morning Al

The scenario you have described is no different to starting a new tenancy with a new tenant and taking no deposit.

Regards

Mark

11:29 AM, 7th December 2011
About 9 years ago

Thanks for that Mark,It really does make you wonder if taking a deposit is worth all the potential trouble.

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