Tough new rules on tenant deposits
As a buy-to-let investor, there’s one piece of new legislation you can’t afford to ignore. Friday 6 April 2012 saw the Localism Act 2011 usher in stringent new requirements designed to safeguard tenants’ deposits for all tenancies starting on or after this date. Thought the original deposit protection rules introduced in 2007 were draconian enough? Wait to you see what the new ones have in store for you.
With the rise of social media, tenants are more clued up than ever before on their rights when it comes to renting. They know the law and they’re quick to share their knowledge with each other. So it stands to reason that they’re well aware that if you fail to prove that you’ve protected their deposits, they can take you to court and get compensation of up to three times the value of their original deposit. And with legal aid now making court action easier and more affordable, even students and the unemployed are finding – to your cost – that knowing the law can really pay off.
So what’s changed? The original rules forced all landlords to protect tenancy deposits via one of three government-approved schemes – MyDeposits, TDS and the Deposit Protection Scheme – and to serve their tenants with a statutory notice to tell them about the scheme they’d used. If landlords failed to protect a tenant’s deposit within a 14-day time period, they faced some tough sanctions: they couldn’t use the court possession procedure until the deposit was protected and had to stump up a fixed fine of three times the initial deposit.
However, the rules – originally drafted in the 2004 Housing Act – contained some significant loopholes that let some successful claims slip through the net. This meant that most landlords got away with either protecting their tenants’ deposits late – or not at all. Landlords were also allowed to use the court possession procedure provided they protected the deposit by the time the case came to court.
Under the new rules, landlords will now be given 30 days (rather than 14) to protect a tenant’s deposit, and issue the notice, but those who fall foul of the rules are no longer to benefit from leniency from the courts. Let’s take a closer look at the key points of the new rules:
- A longer period eliminates the excuse of time pressure for not protecting the deposit
- Any fine will now be discretionary and is no longer fixed; the judge can decide between one and three times the deposit amount depending on the gravity of the offence
- For tenancies that already exist, landlords with unprotected deposits have 30 days to comply, i.e. from 6 April 2012 until 5 May 2012
- Tenants can now claim against their landlord even if their tenancy has ended (for up to six years ) if the 30-day deadline is missed
- Landlords will find it more difficult to use the accelerated court possession procedure unless the deposit has been registered
So what are your responsibilities as a landlord? It’s vital that you:
- Re-protect your tenants’ deposit if you change the contract or increase the rent
- Make sure your tenants get the relevant paper work relating to the tenancy deposit scheme
- Get the correct paperwork from your letting agent (if you use one) within the 30-day period. It’s your responsibility, not theirs.
- Realise that failure to comply could leave you owing your tenants compensation of up to three times the amount of the deposit (in addition to return of the deposit sum)