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Important news for Landlords on tenancy deposits – ignore this at your peril!

No prescribed informationAs reported in a number of places now, for example on Nearly Legal – we have a new case on tenancy deposits.

A new case which moreover, rams home the ABSOLUTE CRITICAL IMPORTANCE of the prescribed information when protecting deposits.

The Court of Appeal speak

The case is the Court of Appeal decision in Ayannuga v Swindells on 6 November 2012. This case involved a landlord, who had protected the deposit but had not complied with the prescribed information.

The tenant had fallen into arrears of rent and the landlord sued for possession. However the tenant defended and counterclaimed, claiming the penalty under the tenancy deposit regulations as the landlord had not provided all the prescribed information.

The landlord, in response to this, admitted that he had not complied fully with the regulations (which you can see here), but said that this wasn’t really necessary as all the information was available on the Internet and the tenant could easily find it out for himself.

The important thing (he said) was the protection of the deposit – which he had done.

The Judge at the first hearing agreed with him, but the Court of Appeal didn’t. They said that the prescribed information was of real importance, as it told tenants how they could seek to recover their money and how they could dispute deductions, without having to go to court.

The landlord was therefore ordered to pay the full penalty of three times the deposit amount to the tenant AND pay back the deposit. And no doubt pay costs.

Why the Court of Appeal were right

I suspect that many landlords will agree with the landlord in this case and consider the prescribed information regulations to be a waste of time.  Another bit of useless procedural nonsense which can be ignored.

However the prescribed information IS really important. Most tenants don’t have a clue about tenancy deposits and how they work. The prescribed information tells them

  • which scheme the landlord has used,
  • how they can be contacted
  • what their procedures are, and
  • where in the tenancy agreement they can find out what the landlord is entitled to make a deduction for.

Which are all things tenants need to know.  As most tenants don’t even know the regulations exist, it is a bit unreasonable to expect them to go scouring the Internet to find out what they say (leaving aside the fact that not all tenants will have access to the Internet – not easily anyway).

Plus of course, its the law.

What this means for landlords

When you take a deposit you MUST with 30 days

  • Protect the deposit, and
  • Serve any leaflet provided by your scheme, and
  • Serve the rest of the prescribed information not covered in the leaflet (in particular tell them the clause in their tenancy agreement that deals with deductions from the deposit)

The schemes vary in helpfulness here, perhaps the most helpful being the RLA DepositGuard scheme, along with the TDS schemes, where a prescribed information form is provided to you.

We have a form on Landlord law which will be suitable for landlords using DPS and My Deposits, and I understand that one can also be purchased from Lawpack.

If you don’t serve the prescribed information:

  • Your tenant can claim the penalty of three times the deposit sum AND the return of the deposit at any time during the next six years and you will have no defence
  • Your tenant will have a defence to any claim you may make for possession based on rent arrears – as they can ask the court to offset their penalty award against the rent arrears
However it looks as if you can still use s21 if you serve the prescribed information late, so long as it is served before the s21 notice is served.

I would advise all landlords, in the light of this case, to check all their tenancies and make sure that they are fully compliant.

Buffer

Important note. If you are reading an old post, remember that the law may have changed since it was written.




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Page 1 of 11

17 Responses to Important news for Landlords on tenancy deposits – ignore this at your peril!

  1. I am a little confused regarding one of the pieces of info above.

    It was my understanding that as long as you served the prescribed information [at any time] before you served the section 21 notice it was then valid (yes albeit still subject to penalty, but still nevertheless valid). Above it suggests that the notice is not valid unless you first unprotect the deposit and subsequently return it to the tenant. This is in conflict with other information I have read.

    And in addition can you clarify something which is not clear on other sites? If I protect the deposit, serve the prescribed info late and then serve a section 21 notice can I use the accelerated possession process still or do I have to use standard route?

  2. @Claire – the law was changed in April. Now you have to protect w/in 30 days AND serve the prescribed information.

    If you can’t use s21 because you failed to protect, you won’t be able to use either procedure I am afraid.

  3. Hi Tessa, thanks for your reply.

    I know the law changed in April 2012 to 30 days but my query was regarding deposits that HAVE been protected but just the prescribed info that has not been served. Your post reads that to regain S21 rights in these circumstances the only way is to return the deposit.

    I have just read multiple explanations online in particular the one on the RLA website which all say that if I have protected the deposit but just forgot to serve the prescribed info the remedy (to allow a valid S21 to be served) is not to return the deposit to the tenant it is to simply now provide the prescribed information and then after which can serve a valid S21 notice?

    Is the RLA paragraph below wrong?

    “If you have not given the prescribed information within 30 days the position is different. You lose your Section 21 rights at any time when the information (and the tenants leaflet) has not been given, but you can regain your Section 21 rights by giving the prescribed information (and the tenants leaflet) to the tenant/s and anyone else who has paid towards the deposit. However, you will still have to pay a penalty if the tenant/s claims it.”

    source:
    http://www.rla.org.uk/landlord/newsletter/february2012/page1.shtml

  4. Hello Tessa,

    Here, along with many other sites;

    http://blog.painsmith.co.uk/2012/11/09/trips-and-slips-with-section-21-notices/

    It says you can serve a valid section 21, even if the PI was served late;

    ‘If the Prescribed Information (“the Information”) has not been served then a valid section 21 notice cannot be served until the Information is served . (N.B. doing the above will not avoid any potential claim for failure to protect the deposit).’

    Are you sure you are correct?

  5. I think the prescribed information requirements *are* a total waste of time.

    Schemes contact the tenant to give them the registration confirmation and their ‘ID’ reference. That should be enough. It is ludicrous to penalize landlords for failing to provide 20 pages of bumph when the tenant could simply refer to the scheme website for its T&C and to the tenancy contract for other info, such as the name of the landlord.

    Paragraph 2(1)(g)(iv) of the The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 even requires the landlord to inform the tenant of the tenant’s name, address and phone number. Again, ludicrous that a landlord could be ordered to pay 3x the value of the deposit for failing to tell the tenant his own name.

  6. However it looks as if you can still use s21 if you serve the prescribed information late, so long as it is served before the s21 notice is served.
    Yes, it’s there in black and white in s.215(2) HA2004 (as amended by the Localism Act).

  7. I have now managed to take a look at the Lawtel report (as an Open University student I now get access to this but it has taken me a while to work out how to log into it) – it looks as if the the Court did consider whether the information in the tenancy agreement would suffice.

    The report says

    “Although the tenancy agreement and additional information addressed the procedure in the event that the tenancy agreement ended and a deposit had to be returned, it was clear that the provisions of the tenancy agreement, as required by art.(2)(1)(c) and art.2(1)(d), did not address the procedural provisions in the deposit scheme itself. ”

    So I don’t think there was a problem with the landlord not telling the tenant what his name was (that was in the tenancy agreement) – the problem was he had not provided the tenant with information about the workings of the scheme.

    In most cases this will be in the information leaflet provided by the schemes for this purpose. In this case the landlord had not given the tenant this leaflet.

  8. Do you know the reasoning behind the awarding of 3 x the deposit, as opposed to just 1 x ?
    On the face of it, the punishment doesn’t seem to fit the crime.

    An unfortunate consequence of all this is that landlords stop taking deposits completely and only accept very low risk tenants.
    - Just my impression from listening to landlords. No figures to back it up whatsoever!

  9. The 1x – 3x award is in the discretion of the Judge. So they can award what they think right in the circumstances.

    I have to say that were I a private landlord I would infinitely prefer low risk tenants! Surely its only when there are no low risk tenants available that you accept the higher risk ones.

    This is the difference between the private and the social housing sectors.

  10. Sorry I wasn’t clear, I was asking why the Judge had exercised discretion in going for the maximium amount. I assume there was some reasoning behind it.

    Your work must show the darker side of private landlords but we’re not all unsympathetic Rachmanns! There is a bit of job satisfaction involved as well as the financial reward.

  11. The Lawtel report does not give the Judge’s reasoning on that point, just the fact that the award was made.

    We will have to wait for the full report – however if someone is being penalised for not doing something and it is still not done by the time you get to court, I think it is pretty standard for the full penalty to be made.

    So if the landlord had realised his mistake and served the information just a few days late, the Court would probably have awarded the penalty at the lower rate.

    This is why landlords should always rectify mistakes as soon as they find out about them, rather than just saying “Oh I’ve missed the deadline so I just won’t do it at all”

  12. I think the 3 times was due to the case being brought to the courts before April 2012 (i think it was March) so in theory the penalty was based on the old rules even though the Court of Appeal hearing was recently.

    I would suggest that if the case was brought now that the penalty would be 1 times.

    Tessa, was the ommission of the scheme rules the only fault of the landlord? Was this indeed a landlord or a letting agent?




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About the post author:

Tessa Shepperson

Tessa is a lawyer specialising in residential landlord and tenant law. She runs the Landlord Law website (now in its 12th year) and is a director of Easy Law Training Ltd and Your Law Store. Tessa also sits on the Property Redress Scheme Council. When not working she enjoys reading, cooking and messing around on the computer. You can also find her on Google



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