The new deposit trap for Section 8 possession claims

Most landlords should be aware that when taking a deposit, it needs to be protected in a scheme. The deposit protection rules have been in force since April 2007, so there is no excuse for non-compliance.

Although many landlords do, in fact, fail to comply.

The old section 21 penalty

In the past, the failure to protect a deposit was a bar to obtaining possession under the ‘no- fault’ section 21 ground.

However, section 21 is now gone. But this does not mean that failure to protect does not affect a landlord’s ability to obtain a possession order.

The new rules

Section 215 of the Housing Act 2004 has been amended by the Renters Rights Act 2025. This now provides that where a deposit has been paid in respect of an assured tenancy, a court may only make an order for possession if

• “the tenancy deposit is being held in accordance with an authorised scheme”
• “such requirements of the scheme as fell to be complied with by the landlord on receiving the tenancy deposit have been complied with (whether or not within the period mentioned by section 213(3)) in relation to the tenancy deposit”, and
• “the requirements of section 213(5) and (6)(a) have been complied with” – this means the prescribed information must have been served

However, strict compliance with the 30-day time limit is no longer required for the purpose of obtaining a possession order. Section 215(2) makes this clear. Landlords protecting late will still be able to obtain a possession order, so long as the deposit is protected before the court hearing.

So if a landlord has failed to protect:

• He can still issue a valid Section 8 notice
• He can still issue proceedings for possession, but
• His claim will only succeed if the deposit is protected before hearing date.

Which possession grounds are affected?

All of them except

• Ground 7A – a mandatory ground based on serious anti-social behaviour, and
• Ground 14 – a discretionary ground based on nuisance, annoyance, illegal or immoral use and certain criminal conduct.

So what should a landlord who has failed to protect do?

1. Protect the deposit in an authorised scheme, comply with the scheme rules and serve the prescribed information.

However, check the scheme to see what its rules say about late protection.  Or,

2. Return the deposit.

This can be in full or subject to deductions which have been agreed with the tenants.  Or,

3. Resolve an existing deposit claim

If the tenant has brought a claim for the penalty under s214, the restrictions end once this has been resolved. This can either be by a court order or by agreement.

However, if you are settling the case, you need to take care with the wording of your agreement.

The Penalty will still apply

It’s probably worth saying here that although late protection removes any bar from the court making a possession order, it will not protect you from a claim by tenants for the penalty for non-compliance.

Tenants can bring a claim if the deposit is unprotected on the 31st day after payment, any time up until the claim is statute-barred six years later.

Focus on rent arrears claims

Most landlords bringing a claim for possession will be basing it on the mandatory rent arrears ground, ground 8.

The conditions for this are that

• The arrears are at least three months’ rent or thirteen weeks’ rent at the date the section 8 notice is served, and
• Before the court makes its possession order, and
• The rent must be ‘lawfully due’ and
• Any part of the arrears figure due to unpaid Universal Credit must be ignored

The claim is also vulnerable to the tenant counter-claiming. This includes a claim for the penalty for non-protection of the deposit, which in some cases can wipe out or substantially reduce the arrears figure.

So if the landlord is evicting on the rent arrears ground, and has failed to protect the deposit, even if it is protected before the hearing, they cannot be 100% certain of obtaining an order unless the arrears are at least three months’ worth + 3x the deposit sum (the maximum award under the deposit rules).

The court may not make the maximum award, but you cannot be certain of this.

Landlords can always claim possession under the discretionary grounds 10 and 11 (which can be for any rent arrears figure), and these are routinely added to possession claim forms.

However, even if the court is willing to make an order, this is likely to be a suspended order. The court can also stay or suspend the order as it sees fit. Whereas, where possession is obtained under a mandatory ground, possession cannot be stayed or suspended for more than 6 weeks after the order was made.

A checklist for landlords:

Before serving your section 8 notice, you should check the following

• Was a deposit taken?
• Was it protected within the applicable time limit?
• Have the scheme’s initial requirements been satisfied?
• Was complete and accurate prescribed information given to the tenant and every relevant person?
• Can compliance be proved?
• Is a deposit penalty claim already threatened or underway?
• Could the penalty reduce the arrears below the Ground 8 threshold?
• Should the deposit be protected late or returned before proceedings continue?

And finally

Although section 21 is no longer with us, deposit protection is critical for landlord success in most possession claims.

So landlords and agents should always check this before serving the section 8 notice – and not afterwards!

Landlord Law members will find further guidance on these matters on Landlord Law, plus if they have a problem, they can ask me about it in our members forum area.