The Devil is in the Detail

The Devil is in the Detail

11:59 AM, 5th December 2011, About 13 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

Share This Article


Comments

19:27 PM, 8th January 2012, About 12 years ago

Just as a matter of interest; and having followed your advices to the letter; this is what occurred with mydeposits.
I completed the form manually as I had a third party plus I wanted a signature from both the ternant and the 3rd party.
I posted the form off rather than inputting the details online.
Of course I retain on e of the forms for my records with the signatures on.
I received only 1 DPC and therefore had to print off another copy from the online site.
I queried with mydeposits why they only sent 1 DPC in the post when there shouild have been 2.
They stated they did not post DPC's to third parties who had contributed to a deposit.
The DPC was posted to me and then I gave it to the tenant.
I also gave a DPC with prescribed info to the 3rd party.
Is it not unreasonable to expect mydeposits to post the DPC's to the tenant's address and the 3rd party's address.
They were not prepared to do this.
I suppose this might be because it is the landlords responsibility to supply DPC's etc. themselves within certain timelines.
Clearly though one must manually complete these DPC application forms whether one intends to use them to post off or just take the info and enter online; but obviously retain a copy of the signed form; just incase a tenant tries it on; as you have warned could occur!

Mary Latham

19:16 PM, 26th January 2012, About 12 years ago

There is a futher warning about the TDS and the Localism Act from a highly respected training provider here
http://www.landlordlawblog.co.uk/2012/01/26/what-can-the-landlord-do-if-he-failed-to-protect-the-deposit/

Mary Latham

19:17 PM, 26th January 2012, About 12 years ago

There is a futher warning about the TDS and the Localism Act from a highly respected training provider here
http://www.landlordlawblog.co.uk/2012/01/26/what-can-the-landlord-do-if-he-failed-to-protect-the-deposit/

Mary Latham

18:36 PM, 6th February 2012, About 12 years ago

At my seminar today a landlord told me a story about loosing thousands to a group of tenants who realised that she had not renewed their deposit protection when they signed a new AST.  Despite huge rent arrears and damages she was forced to repay the full deposit or face paying them the full deposit plus 3 times the same amount as a penality and loosing her excellent reputation

A reminder

A NEW AST MEANS A NEW DEPOSIT PROTECTION

I really hate seeing a good landlord like this one gettting caught out by tenants who knew more than she did.  This was a genuine mistake caused by lack of awareness - we can't afford to make mistakes.

I brought a smile to this landlords face when I told her about Landlord Referencing and how she could warn other landlords about these tenants. It may not get her money back but Landlord Referencing will wrn other landlords in the area.

19:22 PM, 6th February 2012, About 12 years ago

Your comment highlights the issues that LL will face.
Essentially being used as a cash cow by renants based on poor knowledge of LL.
Why did this LL not have RGI or contents and malicious damage insurance.
This is why all the referencing in the world cannot replace a good RGI policy.
It is so cheap now you would be mad not to have it; it also works on guarantors aswell.
There is also the 3rd party game on deposits  and premium tenancies you have mentioned which would catch most LL out; not me though I carry out your advices to the letter.
No s---bag tenant is going to catch me out!

Mary Latham

19:34 PM, 6th February 2012, About 12 years ago

Paul the problem is we don't know what we don't know.  This landlord had 6 weeks rent for a group of 5 tenants as a deposit and, at student rental rates in Birmingham, that is a lot of money.  The deposit would have covered the damages and she could have chased the guarantor for the rent but as soon as the students told her that they would take action because she had not protected their deposit for the second AST she realised that she was stoofed. When a landlord is in the wrong and the tenants are aware of their legal position the only option is to move on. There was a recent case where over 300 students posted on a face book page about an Agent and I am certain that the Agent suffered a huge loss of business.  Internet helps tenants to know their rights and to spread the word about landlords and agents. Thanks to site like this it also allows landlords to keep up to date and Landlord Referencing helps us to spread the word.  The problem is that many landlords are not in the 21st century and are not aware of the power of the www.

Mark Alexander - Founder of Property118

22:38 PM, 6th February 2012, About 12 years ago

I totally concur with what you have said Mary, however, I would also urge all landlords to include conditions in their tenancy agreements to allow them to share information with referencing companies and to get a Data Protection Licence if they don't already have one. Holding any information whatsover, in any form, even paper, about a tenant, now requires a Data Protection Licence. Regrettably, these are yet two other pot holes for landlords to fall into when they are challenged by legally savvy tenants 1) sharing personal data without express permission to do so, 2) storing personal financial data without a Data Protection Licence.

22:54 PM, 6th February 2012, About 12 years ago

Blimey Mark more pertinent stuff for us to know.
I know about putting on an AST any permissions to share data etc with say LRS which I get the tenant to sign for.
However never heard of any requirement to have a Data Protection Licence.
That is worthy of an article in itself and I bet most LL won't have a clue what you are talking about.
I didn't think DPA issues affected a small LL.
It appears I am misguided in this understanding.
I issue receipts for rents paid and keep copies of those receipts.
Does such come into the perview of this licence requirement.

Mark Alexander - Founder of Property118

23:10 PM, 6th February 2012, About 12 years ago

As a business holding data about your customers Paul, YES, you definitely need a Data Protection Licence.

I will write an article as suggested for Thursdays Newsletter.

Mark Alexander - Founder of Property118

23:40 PM, 6th February 2012, About 12 years ago

The blog is now written, search engine optimised, published and tweeted Paul. All within the hour, how's that for service?

Link below

http://www.property118.com/index.php/data-protection-act-laws-affecting-landlords/24111/

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now