In the realm of property rental in England, the protection of tenants' deposits stands as a crucial aspect of maintaining a fair and transparent landlord-tenant relationship. Failure to uphold this responsibility can lead to a myriad of risks and consequences, both legal and practical.
It has been a legal requirement since 2007 for Landlords in
England to protect a dents security deposit in one of the 3 government-approved
tenancy deposit protection schemes.
Failure to comply with these regulations can result in
severe consequences, including financial penalties and restrictions on
possession claims.
Yet month after month I receive enquiries from distraught landlords
facing thousands of pounds in penalties for non-protection.
Most of these landlords have received a heavily threatening
letter from one of the many No Win No Fee law firms who see this type of claim
as easy money or in effect money for nothing, usually leaving the task to an ill-informed
junior.
These letters are accusing, intimidating and demand
Thousands of pounds from landlords as penalty.
If a deposit has not been protected, there is no getting
away with it once a law firm has been instructed, they will be totally focused
on getting the largest financial penalty they can, because that’s the way they get
their biggest fee.
It’s important to remember that a claim can be brought for
every tenancy that the deposit remained unprotected, so for example, if your
sign up a tenant for 6 months fixed term Jan 2017 and you sign a new fixed term
every 6 months until December 2020, you will have signed 8 six-month ASTs, if
the deposit was £1000, the tenant can make a claim for £24,000
Deposit x Max penalty (3x) x 8 tenancies =
Landlords can also be caught out if the deposit I paid by a third
party, for example the tenants parent, if this is the case, the deposit needs to
be registered in the parents name and all prescribed information given to them
as well as the tenant.
Under S213-S215 of Housing act 2004 the law stipulates that
landlords who fail to protect their tenants' deposits or provide the correct
prescribed information within the required timeframe will be liable for a penalty
between 100% and 300% the deposit value, now this penalty is at a judges
discretion, but a judge MUST award a penalty. These fines can significantly
impact a landlord's financial standing and erode the profitability of the
rental property.
In addition, neglecting deposit protection can also hinder
landlords in pursuing possession claims. S21 notice will remain invalid if
issued where a deposit has not been protected or prescribed information given,
the landlords only remedy to this is to return the deposit in full. Sadly this doesn’t
remedy the breach of non-protection and a tenant can still make a claim for up
to 3x the deposit. This can lead to prolonged disputes and financial losses for
landlords seeking to regain possession of their property.
It’s also worth remembering that deposit protection claims can be brought up to 6 years from the date of the breach, so even if your tenant has long moved out, don’t think you are off the hook, once of these claims can come years after the fact.
The risks of not protecting tenants' deposits in England are
substantial and multifaceted. From financial penalties to strained
relationships and legal obstacles, landlords stand to lose significantly by
neglecting their legal obligations in this regard. Adhering to deposit
protection regulations is not only a legal imperative but also a fundamental
aspect of fostering trust and stability in the rental property market.
Landlords would be wise to prioritise compliance with
deposit protection laws to mitigate these risks and ensure a harmonious
landlord-tenant relationship.
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