The new tenancy deposit rules that will put you at risk

Landlords are gradually becoming aware that there is this thing called tenancy deposit protection.

This is fortunate because come April when the new regulations come into force, they are going to get a lot tougher.

Even with the regulations as they are now, many landlords are still making a mistake which could cost them dear.

This is the failure to serve a notice containing the prescribed information upon their tenants.  Many landlords have no idea that this needs to be done AS WELL AS protecting the deposit.

What can happen if you protect but don’t serve this notice?

Now (pre April 2012) the penalties are:

• a payment of three times the deposit sum which the tenant claims via the courts – although you can serve the notice late and avoid the penalty, and

• any section 21 notice served is technically invalid – although if you serve the prescribed information late, a section 21 notice served after that will be all right

When the new regulations come in, the penalties will be:

• you will not be able to use section 21 AT ALL unless either you refund the deposit, or you offset it against money due from your tenant by agreement, or if your tenant has brought a claim regarding the penalty which has been resolved.  You will no longer be able to correct the problem by serving the notice late

• your tenant will have the right to claim against you for the penalty of between 1 – 3 times the deposit (the exact amount to be in the discretion of the Judge) if you have failed to serve the notice within 30 days of receiving the deposit money.  You will not have any defence to this claim.  Your tenant will be able to make this claim at any time up to six years after the deposit was paid (after which time the statute of limitations will kick in).

The requirement to serve the prescribed information is as important as the requirement to protect the deposit.  You need to do both.

Where do you get the prescribed information form?

• TDS have a form which they provide to their members
• DPS have a template on their website
• My Deposits include the information in the certificate documentation and the leaflet they provide

However landlords, particularly amateur landlords, are often still unaware of the need to provide the prescribed information.  After April, failure to serve the notice will leave them open to a claim they cannot defend for the next six years.

Another potential problem:

What if one or more of the schemes’ forms was found wanting?  For example in a defence to a section 21 repossession claim?  This would leave the landlords who had used it open to a claim from their tenants.

Hopefully this will never happen.  However, we all thought we knew how the existing regulations worked until the Court of Appeal drove a coach and horses through them, with their decisions in the  Tiensia and Gladehurst cases.

I would prefer to see a prescribed form provided by government.  Then there can be no argument.

Danger picture by KatJaTo