Landlords must protect their tenants’ deposits


Now more than ever before, landlords need to ensure they have fully protected their tenants’ deposits. Failure to do so could lead to a financial penalty of up to three times the original bond and an inability to regain possession of their own property significant consequences, when they can so easily be avoided.

By law, all landlords even if they use a letting agent must protect their tenants’ deposits under Tenancy Deposit Scheme (TDS) regulations, and must also ensure they pass on important information about where and how it was protected, known as the ‘Prescribed Information’, within 30 days from the start of the tenancy.

The necessity to do so has been brought to the fore yet again with the recent Superstrike Ltd v Rodrigues (2013) case, where the Court of Appeal held that any deposit paid before April 6, 2007, should be registered in a tenancy deposit scheme, even when the tenancy arises after that date.

The implications of the ruling coupled with the fact there are now dedicated no-win no-fee claims firms in operation, encouraging tenants to see if they have a claim against their landlord ean that it is essential landlords ensure they have proper legal provision in place.

From April 6, 2007, it became mandatory for a landlord to join a TDS but what the Superstrike case showed is that despite the tenancy taking effect before that time, the landlord was still liable to be fined for failure to comply with legislation, and, furthermore, was not able to take back possession of his property.

In that instance, the tenant Mr Rodrigues took a fixed term lease on a flat from Superstrike on 8 January, 2007, and paid a month’s rent as a bond payment. After the year long tenancy had expired, by virtue of the Housing Act 2004, he became entitled to a statutory tenancy on the same terms, and he continued to occupy the property until Superstrike issued notice in June 2011 for him to move out.

Although Superstrike argued that the tenancy took effect before the introduction of the TDS rules, so they could not be liable for not protecting the deposit, Rodrigues claimed his statutory tenancy should be regarded as a new tenancy, and his deposit protected as such a view the Court of Appeal agreed with.

Critics of the ruling say that it is loaded in favour of tenants, but the implications of the decision must be noted. Landlords must remember that once a fixed term lease that was agreed pre April 2007 expires, but when the tenant remains in possession, they must make arrangements for the deposit to be held in accordance with a TDS.

Furthermore, failure to adhere fully with the rules can also lead to a successful claim from a tenant. In one recent county court case, a possession order was overturned because the landlord’s name and address did not appear in the Prescribed Information.

If landlords have any doubts at all over what they need to do with regard to protecting themselves, it is essential they take legal advice failure to do so could result in a financial penalty which could run into thousands of pounds, as well as being unable to regain possession of their own property.

Scott Cable
Solicitor
email: scott.cable@sintons.co.uk
tel: 0191 226 7806


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