A Landlord’s Guide to Tenant Deposits
As a landlord, it is vital that you understand the current law regarding tenancy deposits. If you fail to comply with the rules it might affect your right to reclaim rent arrears should the tenant miss any payments.
Landlords must protect a tenant’s deposit in one of three Government-approved schemes under the Housing Act 2004 if the property is rented out on an Assured Shorthold Tenancy (AST) that started after 6th April 2007.
The three Government-approved deposit protection schemes are:
Once tenants have paid the deposit in full, landlords have up to 30 days to protect the funds and provide tenants with details of where their money is held. As part of this process it is your legal right to give them the following information:
- Full address of the rental property
- Total amount of deposit paid
- How the deposit is protected
- Name and contact details of the tenancy deposit protection scheme and up to date details of the dispute resolution service
- Name and contact details of the letting agent (or your details if you are the agent)
- Name and details of any third party that has paid the deposit
- Possible reasons why you would be likely to keep some of the deposit
- Details of how tenants can claim their deposit back
- What tenants should do if they can’t get hold of the relevant person at the end of the tenancy agreement
- How tenants can resolve any disputes over the return of a deposit
Failing to comply with these rules could leave you liable for a fine, which is why it’s important to provide all the relevant details listed above. If you do not protect the tenant’s deposit or give them adequate details and information about where their money is held, tenants are within their rights to claim the return of the deposit, or a judge can order its return on their behalf. As a landlord, you could also face a further fine of between one and three times the amount of the deposit.
Section 21 notices
Furthermore, failing to follow current deposit laws will also mean you won’t be able to use a section 21 notice to evict your tenant if there is a problem. So if they fall into rent arrears, you won’t be able to get them out of your property using a section 21 notice, which allows landlords to start the accelerated possession procedure. If you wish to recover your property, you will have to return the deposit first. Also, if you want to try and recover rent arrears, you won’t be able to use the deposit as part payment is it isn’t properly protected.
Section 8 notices
You can still use a section 8 notice to seek possession of your property if you haven’t protected the deposit, as long as you can prove grounds for possession, such as rent arrears. But you should be aware that the tenant can still claim for the penalties in respect of the tenancy deposit law breach.
If using a section 8 notice, you must prove that you have grounds for possession when the case comes to court. For rent arrears, ground 8 is the most commonly used ground. You can only use this order if your tenants are in arrears by at least two months’ (if they pay monthly) or eight weeks’ arrears (if they pay weekly).
For more information visit Just Landlords website here.
Disclaimer: This article is for information only and is not official guidance, FCA approved, or legally precise.