The tenancy deposit has not been protected.
This is an important defence and one that is set to become more significant after the changes to the tenancy deposit regulations come into force next April.
The situation now
If the tenancy deposit has not been protected AND the notice giving prescribed information has not been given to the tenant, then any section 21 notice served will not be valid.
As you will see if you look at the the current claim form N5b for accelerated possession proceedings, there are now very specific questions you have to answer, including giving the number of your protection certificate.
There is also a rather confusing question about taking a deposit in the form of property – the reason this is here is that the regulations only allow you to take a deposit which is in the form of money.
So if you take instead a bag of diamonds, jewelry or a valuable piece of equipment, or anything else of value which is not money, which you promise to give back if the property is left in a proper condition, this is illegal and you must return it before serving your section 21 notice.
It Is very important that the notice with the prescribed information is served. Many landlords do not realise this and just protect the deposit. However there is not really any excuse.
- The DPS provide a template for this online here,
- I understand that My Deposits provide a form or leaflet, and
- The TDS scheme have their own form of the notice which is made available to TDS members.
If you issue proceedings before the deposit has been protected and the notice served, the Judge will dismiss the claim and you may be ordered to pay your opponents legal costs.
At present, if you do not protect your deposit and serve the notice within the initial 14 days, then so long as this is done before the section 21 notice is served you are all right. However this looks set to change after the new regulations come into force.
The situation after the new regulations come into force
This is expected to be in April 2012. The period of time for protecting the deposit and serving the notice with the prescribed information is extended to 30 days.
However, if you do not serve within that time, you will not then be able to serve a valid section 21 notice AT ALL unless you give the deposit back to the tenants first.
Alternatively you will be able to serve a valid notice if the tenant has already sued you under section 214 and these proceedings have been resolved in some way.
So after April next year it is VITAL that you get those deposits protected and the notices served within that initial 30 day period.
Jewelry picture is Wikipedia commons
I may be wrong but I see the big area as arguments about if the prescribed information was given. Protection is fairly simple and clear cut but there is so much in the prescribed information it is easy to get it wrong. There are lots of pitfalls but two I usually flag up are the Post tenancy contact address and the information about the relevant person. Many many landlords and agents are not even asking for this information, therefore not including it in the prescribed information. After April, will this enough to block section 21 and leave you liable to the penalty? IN the Suurpere v Nice case they argued that only some was given and not all. We don’t yet have definitive judgements about what is enough.
Also beware the trap that the information given by the scheme is not likely to be the complete prescribed information. For example, The DPS and MyDeposits both send information to the tenant (or via the landlord) but is there enough here to qualify as the prescribed information? Most landlords are presuming it does yet one piece of prescribed information is “by reference to the tenancy agreement”, the reasons money might be withheld from the deposit. How can the scheme possibly give this part as they don’t know what your agreement says?
I think people should be far more concerned about these changes that the market indicates.
Don’t forget that if the deposit was taken before 6 April 2007 but the tenancy was renewed for another fixed term after that time, this triggers deposit protection (Saad -v- Hogan).
However, a periodic tenancy self-renewing for the next week or month or whatever does not trigger deposit protection. I tried to argue this recently on the wording of s. 5 HA 1988 and although it got us over the first hearing at trial we were shot down.
(I was annoyed because the landlord’s solicitors kept sending me snarky letters about how we were clutching at straws and coming up with bizarre arguments and generally acting like the south end of a northbound donkey and I was hoping to make them eat their words.)
Similarly, when the Localism Act comes down the spike and changes this stuff I assume that there’ll be scope to require deposit protection under the new regime if the tenancy is renewed again for a fixed term. I foresee many iffy letting agents accidentally turning their ASTs into ATs by this method…
Whilst I have not heard of any claim that a periodic agreement is another tenancy each time, there is an argument on the basis of sec 5 HA88 about the fixed term tenancy ending and the periodic agreement arising and it would be interesting to have this argued properly in a court of record (but someone has to be willing to pay for this!). If you only got as far as the county court I would not worry as we would not have the appeal system without reason! The problem is that for the money involved it is rarely worth it.
I agree we are going to have to be much sharper under the Localism Act a once the 30 days are up there is no avoiding the penalty of 1 to 3 times the values of the deposit. For an agency, with every new tenancy and every renewal over a period of 6 years (presume limitations)times the value of the deposit time 3 (the maximum penalty) and you have serious issues. I worked it out for 200 lets renewed or relet every 6 months with an average of £900 deposit and a liability if they were awarded 3 times the deposit of about £6,000,000. Now there is a dodgy piece of legislation if ever one was seen.
Thanks for your comments. I agree that there is scope for challenge to the notice. However this may not happen that often as there is no requirement to exhibit this to the N5b claim form.
JS – whether a deposit needs protecting when a periodic tenancy kicks in is something we have debated in our office, and we wondered what a Judge would make of it. Your argument sounds well founded, I’d be interested to hear what the Judge said? Thanks
So in the future I will be able to make deposits in other form than money?
@John Ferrel No, that is forbidden under the rules. As I say in the blog post.