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

11:54 AM, 31st December 2011, About 11 years ago

Paul the best way to add another person to an exisiting Tenancy Agreement is by Deed of Assignment.  The exisiting Tenant assign the Tenancy to themselves and to the new person and the Landlord signs the assignment too. This means that the tenancy continues and does not start the time clock again thus avoiding the "danger zone" for landlords. I am often asked for a new 6 months agreement but I explain that the tenancy will become a stutory periodic which gives tenants the same terms and conditions as the original AST but does not lock them into a fixed term
 
The legilsation does not allow a landlord to charge the protection fee to a tenant regardless of the circumstances but many landlords charge an adminstration fee to cover all of the costs of drawing up a tenancy and this could cover the protection fee so long as you do not state that this is what it is for.
 
I use the NLA AST which is free to members and is very comprehensive and "safe". The NLA AST can be bought by none members from the NLA web site. I have seen AST's from respected organisations which would not stand up in court and it is too important to risk writting your own.  I also think that the NLA logo gives it more cridibility with tenants. 

I do add one clause and that is to say the following
 
This Tenancy is only granted on condition that if at the start of the Tenancy or at any time during the Tenancy the Tenant relies on state benefits to pay all or part of the rent due these benefits shall be paid directly to the Landlord by the local authority or agency without any deductions whatsoever. If the amount paid in benefits does not cover the amount due the Tenant will pay the shortfall to the Landlord on the due date and in the manner agreed.

by

15:52 PM, 31st December 2011, About 11 years ago

Mary I have just had cause to go on the mydeposit site.
It would appear that the info regarding protecting the deposit is that a new fee has to be paid and you CANNOT avoid it even with a deed of asignment
Please look at the info and tell me if we are both wrong,
This as it looks like you have to protect the deposit again irrespective.
This is new info to me and it seems to me that as fast as you learn new stuff even more comes along to trip you up!!?

by

17:23 PM, 31st December 2011, About 11 years ago

Does this clause work as I thought LHA could only be paid direct once 2 months payments hadn't been passed on or they were mentally not capable

by Mary Latham

16:03 PM, 1st January 2012, About 11 years ago

Paul in DWP guidance issued in April 2011 a local authority has the option to pay the landlords directly to secure or safeguard the tenancy so long as the rent is affordable to the tenant.  This is not regulation and some authorities are ignoring it but in the West Midlands I have had the discussion with my authorities in my "official" capacity and they are all working to the new guidance and therefore yes this clause does work - it also works in many other parts of the country.  This is the
wording and the source of the information.  It is worth talking to your local Housing Benefit department to ask them what their position is on this guidance - some of them are not even aware of it!!!

Local Housing Allowance Guidance Manual – April 2011

"From 1 April an additional safeguard
enables local authorities (LAs) to make payment direct to the landlord where
they consider that it will assist the customer in securing or retaining a
tenancy. For a tenancy to be secured or retained it is implicit that the rent
should be affordable to the tenant."

HB Reg 96(3A)(b)(iv) and HB (SPC) Reg 77(3A)(b)(iv)

by Mary Latham

16:10 PM, 1st January 2012, About 11 years ago

Paul I am going to contact MyDeposits this week and ask the source of this because I have searched the legislation and I believe that a new deposit protection fee must be paid on a new tenancy agreement and a "varied" AST is not a new contract and therefore I am not clear why a new fee should be paid.  I will report back on this when I have an answer - thank you for pointing this out I had missed that on the site

by

19:13 PM, 1st January 2012, About 11 years ago

I presume that with the introduction of UC the proverbial apple cart will be upset and we will all be on a very steep learning curve!!!?

by Mary Latham

21:21 PM, 1st January 2012, About 11 years ago

Paul Yes UC will be a whole new ball game but I will post an article on how landlords can keep their backs covered and make certain that they get the rent long before it happens.  The solutions to UC are also going solve several other problems that landlords face like lack of notice, abandonment etc.

by

23:01 PM, 1st January 2012, About 11 years ago

Thanks Mary for that info, & also the rest of this side shoot of comments between you & Paul ... very interesting!

by

19:20 PM, 2nd January 2012, About 11 years ago

How do you get to know all this stuff Mary.
It sounds to me like you have probably read the UC govt bill cover to cover which is probably a lot more than most ministers have!!!?

by Mary Latham

14:06 PM, 8th January 2012, About 11 years ago

I have just been asked on Twitter "What is the protection certificate I need to give to my tenants"

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

When you register a deposit with one of the government schemes they will give you a Protection Certificate to download, they will also give you a receipt to download because this is tax deductable. You should download the certificate and make copies for yourself, your tenant and any 3rd party who has provided the deposit. You must also provide the prescribed information, which you can also download from the scheme website. It is not only legally required to protect the deposit it is also a legal requirement to provide these documents with 14 days (at the moment and 30 from April 1012). If you have registered a deposit but have not provided your tenants with these documents you can still go back to the scheme website, access your account and download them.


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