The Devil is in the Detail

The Devil is in the Detail

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

Text Size

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

20:01 PM, 9th December 2011, About 11 years ago

Mary have you ever thought of working with the CML.
This so that an information pack would be given out to the mortgagee when they complete purchase of the BTL property.
This would be to the advantage of the BTL mortgage company and the new landlord who would have all the latest information landlords would be required to enforce.
This information pack would be updated with new mortgage issues.
It is clearly in the interests of both mortgage company and landlord that the landlord is complying with ALL relevant regulations.
Not doing so could mean in extremis dead tenants , destroyed property caused by gas cheques etc not being carried out.
Inability to repossess property by mortgage company due to deposit protocols not being adhered to etc.
The CML clearly needs to be more responsible in information provision to it's landlord clients.
ALL parties would benefit form such an information pack.
There needs to be joined up thinking from the major landlord associations, ARLA, Shelter and any other organisation or interested parties that have an interest in there being correct provision of information to existing and prospective landlords.
I for one would welcome being able to register with Shelter as a landlord, whereby I would receive continual updates as to my responsibilities as a landlord.
This on the basis that Shelter are pretty much on the ball when it comes to latest information affecting the rental market.
Indeed I would go as far as saying that such a landlord registration scheme at Shelter would give responsible landlords additional marketing advantage over landlords that do not wish to register with Shelter.
Tenants would seek out landlords who have registered with Shelter as they are hardly likely to if they are a rogue landlord.
Therefore all us good landlords should get good tenants coming to us as they would see we a re Shelter registered.
What do you think.
Clearly there would be logisitical problems but the benefits for AL are plain to see!!!?

by Mark Alexander

20:51 PM, 9th December 2011, About 11 years ago

Paul, I think your CML idea is a great one. I also like the other idea except I think the Salvation Army would be a far better choice. I see Shelter as a machine which raises millions and spends it all on propaganda and little else. When did they ever provide a roof over a persons head, open a soup kitchen, re-unite the homeless with their families etc. Being clever at PT does not make Shelter the landlords perfect partners.

by Mary Latham

21:14 PM, 9th December 2011, About 11 years ago

I am actually working on something similar at the moment Paul.

Many landlords would associate Shelter with LHA tenants

I have to agree with Mark I dont think shelter would be the right agency but you have a good idea.

by

22:04 PM, 9th December 2011, About 11 years ago

Yes I was just thinking out loud.
What are landlords thoughts as to an appropriate organisation that would be recognized for probity by ALL parties in the BTL industry and would facilitate landlord registration etc.
I think the Sally army are a trusted organisation but I am not sure whether they would be deemed an ideal BTL industry associate.
Perhaps some sort of central scheme comprising various accredited members such as ARLA, local councils, NLA, RLA, even Property118.com!, other landlord associations etc.
So you would register with your relevant accredited organisation which would forward the landlord details to a central database which could be accessed by tenants.
I appreciate that potentially there are logistical isues, costs etc.
Perhaps a small fee payable by the landlord to register.
Possibly also to attempt to obtain testimonials from honest organisations.
Maybe even some sort of govt grant to set up the service.
Just brainstorming here and clearly there are more informed of you out there that would come up with better ideas.
But I am convinced the principle from a landlord marketing perspective is a sound one.
How it might be delivered is clearly a rather large imponderable!

by

23:27 PM, 9th December 2011, About 11 years ago

What about the possibility of accredited organisations like NLA, RLA, Property118.com,
local councils, etc taking landlord registrations and then forwarding the details to a tenant accessible database.
Appreciatr the logistics involved but a small fee payable by the LL ; cheap marketing would give tenants the opportunity to source good landlords.
I'm sure if we sat around and brainstormed this one we might come up with some good posibilities.
My contibution to the situation is clearly just a little inclement weather!!!

by

9:02 AM, 10th December 2011, About 11 years ago

As a joint landlord (with my brother) managing a small portfolio of properties in London and Leicester, what I often do is put down the deposit as an Adminstration Fee rather than a deposit. I make it clear to the the tenants that this is what I am doing and it would be refunded to them (and i always do of course).

I guess this is easier to achieve if you are managing your own portfolio and not via letting agents who inevitably would want to do it the 'proper' way.

by

10:15 AM, 10th December 2011, About 11 years ago

I have a single property that has had a tennant in for the last 3 years, I did not bister the deposit, however it is still secure in an account. They have given me notice that they will be moving out the end on January. I have no reason to hink that they will withhold the last months rent or leave the property in unreasonable condition.

I was aware of the dps scheme, but honestly not aware of the consequences for not using it. Yes I know, ignorance is no defence. However, should I place the funds in a dps now?

David

by Mark Alexander

10:26 AM, 10th December 2011, About 11 years ago

Absolutely YES you should in my opinion. I admire your honesty too. There are literally thousands of people who rent out properties and have no clue what the laws are. They fail to get annual gas checks, fail to declare their rental income on their tax returns and don't know what they can claim to reduce their rental profits and capital gains etc.etc. etc. If you know anybody who rents out property then please tell them about this website. I also stronly recommend they join a landlords association becuase by law, they are landlords the first time they take a rental payment. Landlord accreditation courses which cost just £150 are also available via MLAS, NLA and LLAS and are vital to everybody in the business in my humble opinion.

by Mark Alexander

10:29 AM, 10th December 2011, About 11 years ago

Moin, if you own a Ford Focus and spray it red and attach a Ferrari badge it is still a Ford Focus so far as the law and the DVLA are concerned. The analogy I am making is that it doesn't matter that you call the payment you have received and promised to pay back an "Administration Fee", by law it is a deposit and should be protected as such.

by

10:38 AM, 10th December 2011, About 11 years ago

I may have been a little hasty with my last post, I have just been reviewing documentation and I have a Certificate of Tenancy Registration with thedisputeservice.co.uk that was set up by the agent that managed the letting. Does this cover me?

David


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

BECOME A MEMBER

Landlord Tax Planning Book Now