Here is a question to the blog clinic from Ali (not his real name) who is a landlord
I have had a tenant in a flat who signed an agreement for 6 month as from 6 Nov 12 paying a deposit for 2 months of £640.
It seems that I forgot to register the deposit.
He then in Feb 13 signed another agreement for 12 months taking effect on the 6 May 13.
He changed his mind and served me notice to vacate on the 6 October. In that Notice he asks for me to use the deposit to pay from 6 aug to 6 october.
I have never accepted his notice. In fact I held him liable for council tax until the flat was relet.
He now turns round to me and claims back the deposit plus council tax as otherwise his solicitor will take me to court for 3 times the deposit.
My argument is that since he himself asked to use the deposit to pay the rent the deposit does not exist and he has no right to ask for 3 times the deposit.
Would you please advise me in this matter.
Answer
I am afraid I have bad news for you.
When you are liable for the penalty
If you did not protect the deposit this does make you liable for the penalty for non compliance with the regulations.
Under the Housing Act 2004 s214(4) the Judge has to make an order for the penalty payment if the tenant applies to the court requesting this, if you have failed to protect the deposit within the 30 day period:
“The court must order the landlord to pay to the applicant a sum of money [not less than the amount of the deposit and not more than] three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.”
The thing which triggers the liability for the penalty is failing to protect a deposit within 30 days of payment. The fact that, as you put it, the deposit ‘did not exist’ at a later date, does not cancel your liability.
As soon as the 30th day after the deposit has passed, you are liable to having the order to pay the penalty made against you – there is NOTHING you can do to change this.
No exceptions
The Judge does not have the legal power to refuse to order the penalty (see that the clause above uses the word ‘must’), all he can do is decide whether the penalty should be 1, 2 or 3 x the deposit sum.
Many landlords find this hard to accept, but that is the law. There are no exceptions.
It gets worse …
Indeed, if the deposit carried over to the second fixed term it is possible that the tenant may be entitled to TWO awards, if you did not protect the deposit within 30 days of the start of the second tenancy and serve the prescribed information.
This would make you liable for up to six times the deposit sum.
Liability for repayment of the deposit
The act also says that the Judge should order the landlord to refund the deposit money (or pay it into a scheme) but as you can prove that the deposit was offset against the arrears with the tenant’s consent, this should not apply to you.
However, in the circumstances it may be best to let this tenant go as he wishes, and make sure that all deposits taken in future are protected promptly within the time limit.
Unfortunately, the tenant pulled one on you. Deposit regulations are extra strict (and yes, there is a need for that). As Tessa says, there are no exclusion to the rule.
If 30 days have passed, you’re liable in court for the penalty.
The fact the tenant consent to using their deposit as a payment for the arrears is not related to you protecting their money. It only means they probably wont get ruled the extra deposit by the judge. Normally, it’s 1 + up to 3x the deposit.
You’re basically in a choke-hold and need to tap or lose more money. This should be a warning for next time and all your future dealings with tenants.
Never start a grudge war, unless you’re 100% in check with all law and regulations.
If you didn’t go and hold him liable for council tax, knowing you failed to protect the deposit, you’d be walking away with your money right now and not paying it to a grudged out tenant.