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Coming soon – New tenancy deposit penalty rules

RESIDENTIAL LANDLORDS ASSOCIATION

NEW TENANCY DEPOSIT PENALTY RULES – COMING SOON

IMPORTANT NEWS FOR LANDLORDS WHO TAKE DEPOSITS FROM TENANTS – THIS AFFECTS YOU

The Government has revised the penalty rules which apply if you fail to comply with the statutory requirements when you take a deposit from a tenant. The new rules are expected to come into force in early April 2012. They will affect deposits which you are already holding if you have not already complied with the existing requirements. They apply to all new deposits as well.

IMMEDIATE ACTION is needed NOW if you are NOT compliant.

The new rules mean: –

Once the new rules take effect deposits under assured shorthold tenancies must be protected within 30 days of receipt (14 days at present).
The tenant/s (and anyone else paying towards the deposit e.g. a parent) must be given the prescribed information within 30 days of you receiving the deposit, once the new rule is in force (14 days at present). N.B. This is not just a copy of the official receipt that you will receive from the scheme administrator – see below. You must give the tenant/s (and anyone else paying towards the deposit) a copy of the relevant schemes tenants leaflet as well.
Failure to comply with either requirement within the new 30 day time limit means that you could have to pay a penalty of between one and three times the amount of the deposit. Time is of the essence for compliance with both requirements. There is no provision allowing any extension of time.
Separately, if you fail to protect the deposit within the 30 day time limit once it applies you cannot use a Section 21 notice to evict the tenant so long as you are holding the deposit, unless their has been a Court Order dealing with the penalty or the deposit has been returned. This means you lose your Section 21 rights and that in effect your tenancy is a non shorthold tenancy in this situation. You can get your Section 21 rights back by returning the deposit in full. Alternatively, you can return it with deductions so long as the tenant/s agree these deductions.
Assuming that you have protected the deposit within 30 days but have not given the prescribed information within the 30 days allowed, you cannot serve a Section 21 notice to end the tenancy until the prescribed information has been given.
Even if you get your Section 21 rights back as outlined above, you are still liable to pay a penalty is one is claimed.
Penalties for non compliance can now be claimed even once tenancies have ended so that former tenants can claim for up to six years and a claim can be made even if the deposit has been refunded (unless the tenancy has already come to an end no later than the start date in April 2012).
The 30 day period starts on the day of receipt of the deposit. This day is included in working out the 30 day period (even if the tenancy starts later). The day the scheme notifies you that the protection is effective is the key date and, in the case of prescribed information, it is the date that it has actually given to the tenant/s (and any third paying towards the deposit) which is crucial.
Cleared funds may be needed in order to effectively protect the deposit whether to pay over the deposit itself or any fee required to protect it (depending on which scheme you use) so allow long enough for this and do not leave things to the last minute.
The new rules will apply to deposits which you are already holding when they come into force. You will be allowed 30 day period of grace from the start date to protect these deposits and/or give the prescribed information if you have not done so already. Failure to comply will mean that the new penalty/Section 21 rules will apply in the same way as they do to new deposits.
FOR ANSWERS TO YOUR QUESTIONS CLICK HERE

FOR MORE DETAILED INFORMATION CLICK HERE

FOR PRESCRIBED INFORMATION AND TENANTS LEAFLET ETC CLICK HERE

About the author

RLA

RLA

The Residential Landlords Association (RLA) represents the interests of landlords in the private rented sector (PRS) across England and Wales. With over 23,000 subscribing members, and an additional 16,000 registered guests who engage regularly with the association, we are the leading voice of private landlords. Combined, they manage almost half a million properties.

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