24th February 2020 | Caroline Vernon | Residential Property
Residential landlords must, where there are Assured Shorthold Tenancies (lettings to individuals with an annual rent of less than £100,000), hold the deposit in a statutory tenancy deposit protection scheme. This applies to all new deposits held or ASTs entered... Read more
Residential landlords must, where there are Assured Shorthold Tenancies (lettings to individuals with an annual rent of less than £100,000), hold the deposit in a statutory tenancy deposit protection scheme. This applies to all new deposits held or ASTs entered into on or after 6 April 2007.
There are two types of schemes: a custodial or an insurance based scheme. A landlord must within 14 days of receipt of the tenant’s deposit comply with the requirements of the scheme and provide the prescribed information directly to the tenant.
Where the landlord does not comply, the tenant may apply to the County Court and the Court can demand that the deposit is repaid to the tenant or that the landlord pays it into a scheme within 14 days.
The court has discretion where the landlord does not comply, to order the landlord to pay a fine equal to three times the deposit amount, to be paid within 14 days of the court order. In such instances, the landlord is also prevented from obtaining a court order to remove the tenants from the property. Therefore, vacant possession is to be threatened.
The case of Suurpence v Nice [July 2011] which reached the High Court ruled that a landlord cannot rely on the provider to supply the information and that the landlord must do so itself. Even if the deposit has been repaid to the tenant before the hearing date, the landlord could still be liable to the fine, if the information has not been provided to the tenant before the hearing.
In addition, the Government has sought to tighten up the legislation by the Localism Act 2011 which will provide once in force:
- The landlord will not avoid being ordered to pay a fine by complying with the initial requirements and giving the prescribed information by the hearing date;
- Even where the tenancy is at an end the Court has the power to order a fine;
- Landlords will have 30 rather than 14 days to comply with the initial requirements and provide the prescribed information;
- The fine will not automatically be three times the deposit amount and the Court will have the discretion to aware from one to three times the deposit;
- Even where there has been non-compliance, the landlord will be able to regain possession using the “notice only grounds” in a Section 21 Notice, if the deposit has been refunded to the tenant in full or with the agreed deductions by the landlord or tenant or the Court application has been determined, withdrawn or settled.
The Government legislation makes it clear that the courts continue to take a dim view of non-compliance with the tenancy deposit requirements. Although allowing recovery of possession of the property once the deposit has been repaid does allow landlords some element of control.
To find out more, please contact Caroline Vernon.