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 Mark Alexander

10:42 AM, 10th December 2011, About 11 years ago

Hi David

I am confused, if the deposit is lodged with TDS, how can it also be in your separate bank account?

If you had a My Deposits certificate that would make more sense but only if you had not created a new tenancy at any point.

by Mary Latham

10:45 AM, 10th December 2011, About 11 years ago

Mark is right any money taken to cover a landlord against losses or damages is a DEPOSIT whatever you call it. This is specifically covered in the Housing Act 2004.
If you do take a non-refundable admin fee this is different but the fact that you are stating that it will be refunded means that it is in reality a deposit.

The whole point of the legislation is to give the tenant the opportunity to ask for independant arbitration in the event of a dispute about the money withheld from their deposit andything a landlord does to prevent the tenant having this redress is unlawful.

I know a landlord who does not take a deposit nor an admin fee but he tell the tenant that if the rent is paid in full and on time and the property is handed back in reasonable condition he will refund the last months rent. Since this is a refund of rent legally due this would not be considered a deposit - I am not sure how many landlords could afford to do this - this landlord does it to help tenants who may not bre able to afford a deposit as well as the first months rent while at the same time ensuring that they have a vested interest in being good tenants.

by

10:53 AM, 10th December 2011, About 11 years ago

I know mate, I am going from memory, I will need to check my bank account I think.

What I have is a Certificate of tenancy registration, on it it states the tenancy details including the value of the deposit and says it is protected by The Dispute Service Ltd.

My honest recollection is that the agent passed on the deposit to me. Could this be the insurance based type of scheme that is in place.

David

by Mark Alexander

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

David, I may be wong in what I previously said. I always use My Deposits which IS an insured scheme, DPS is a custodial scheme. I am familiar with TDS but I've never looked into it in detail. If it is an insured scheme, which having had a quick look it appears to be, you may well be OK so long as a new tenancy has not been created. The website for TDS is http://www.thedisputeservice.co.uk/

by Mary Latham

11:20 AM, 10th December 2011, About 11 years ago

Right again Mark. The safe option is to protect the deposit even at this late stage because until the new changes take place (probably April) you would still be covered.

Thank you David for your honesty, you illustrate my point that it is not just bad landlords who fail to meet their legal obligations and the purpose of this article is not to protect the rogues but to make certain that the good guys are aware that a small issue can get a landlord into big trouble

by Mary Latham

11:22 AM, 10th December 2011, About 11 years ago

David make certain that you give a copy to your tenant if the agent has not already done so and yes you are covered

by

11:30 AM, 10th December 2011, About 11 years ago

Thanks guys for all your comments.

by Mary Latham

15:39 PM, 10th December 2011, About 11 years ago

If you have found this article useful please look at this one which gives you more warnings about mistakes landlords often make
http://www.property118.com/index.php/further-warnings-to-landlords-about-tenants-deposit-protection/21902/

by

15:29 PM, 12th December 2011, About 11 years ago

My deposit has not been put in a scheme, I paid it 14 months ago. My tenancy agreement states I have to give three months notice. Can I weigh one breach off another if I want to leave the tenancy early.

by Mark Alexander

16:17 PM, 12th December 2011, About 11 years ago

What was the term of your initial tenancy Michelle? The norm is 6 to 12 months if your tenancy is an assured shorthold tenancy agreement. if that's what you've got the law says you only have to give one months notice once the initial term has expired, regardless of what you tenancy agreement states.


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