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British landlords urged to check tenancy deposits ahead of June deadline

Tenancy Deposit Protection schemes have been in place since 06 April 2007 but a court ruling said that any tenancy which began before that date but was renewed or became a statutory periodic after that date was deemed to be a new tenancy and therefore the deposit had to be re-protected.

This created confusion as legally deposits that had been correctly protected suddenly became unlawful. This has now been addressed by the Deregulation Act 2015 which came into force in March requiring all landlords to comply by 23 June so that all tenancies are protected under one of the government authorised schemes.

For deposits taken before the 06 April 2007 and where the tenancy became periodic prior to this date, landlords and agents aren’t required to protect the deposit however, they won’t be able to serve a section 21 notice to regain possession of the property unless the deposit is protected with a tenancy deposit scheme.

The Association of Residential Agents (ARLA) is urging all landlords to check that they comply with the regulations before the deadline. If landlords fail to comply they could be liable for sanctions which include a potential claim by the tenant for compensation of up to three times the amount of the deposit paid and find themselves unable to bring a tenancy to an end through a Section 21 notice.

The protection of tenant deposits is always a hot topic in the private rented market and something that often causes the greatest amount of disagreement between tenants and landlords. Following a number of high profile court cases where landlords have been challenged by tenants for up to three times the deposit amount and on the enforcement of notices to quit, there is now greater clarity on what landlords should and should not do.

‘The new Act provides clarity on the tenancy deposit protection regulations in practice, especially with regard to whether the pre 06 April 2007 deposits fall under the protection rules. The onus is on landlords to adhere to the new rules and ensure they’re compliant,’ said Fran Mulhall, regional operations manager at property rental specialists GFW Letting.
‘I think the deposit protection ruling from the Act can only be seen as a positive change, however I think there is a danger of detrimental effects that the Act might unintentionally encourage, relating specifically to the Section 21 notice to quit. The Deregulation Act has altered the rules regarding serving notice to quit, namely the timing in which the notice can be served and the period of notice required to be given to the tenant,’ Mulhall pointed out.

‘Landlords who had been served with a local authority improvement notice for failing to carry out repairs requested by the tenant within a timeframe could fall foul to the lack of power to serve a Section 21 notice to quit for six months. Though this has been brought in to try to tackle retaliatory evictions, there is licence for this to be abused by dishonest tenants in fabricating repair situations, leaving landlords powerless to do anything,’ she added.

An estimated 330,000 existing tenancies affected and research figures released by mydeposits, one of the three government approved tenancy deposit protection schemes, suggest that 48% of landlords struggle to keep up with changes in legislation which could exacerbate the issue.

‘It’s important that landlords and letting agents are aware of the legislation changes and how it affects them. They must act now and check whether they need to protect any deposits and avoid a fine,’ said chief executive officer of mydeposits Eddie Hooker.

‘Our advice is simple; if you still have a deposit that was taken before 7 April 2007 then the belt and braces approach is to protect it and provide your tenant with all the relevant information as soon as possible. That way you can avoid a hefty penalty and regain possession if needed,’ he explained.

He also pointed out that protecting a deposit with mydeposits is simple and can be done online 24 hours a day, seven days a week and the firm has a dedicated team of advisors to help landlords and agents ensure that they act in time to protect older deposits.

The legislation has the potential to put landlords in a very vulnerable position, according to Danielle Hughes from property and landlord specialists at Kirwans. ‘Landlords who have not protected deposits have only days left to begin taking steps to address the issue and make the necessary arrangements,’ she said.