Protect deposit received from tenants in relation to an Assured Shorthold Tenancy (‘AST’)

Aston

24 August, 2021

The Tenancy Protection Scheme came into affect on 06 April 2007. This scheme introduced the requirement for landlords to protect deposit received from tenants in relation to an Assured Shorthold Tenancy (‘AST’). Initially it only applied to ASTs created on or after 15 October 2015. But from 1 October 2018, the Deregulation Act 2015 made it mandatory for all ASTs deposits, including those entered into before 15 October 2015, to be protected.

The importance of protecting AST deposits is at times overlooked by landlords. As such we often find landlords approaching us for advice in relation to the consequences of failure to comply and their tenant’s right to bring a claim.

This article provides a digested summary of the law in response to the above.

What constitutes to a deposit?

Section 212(2) Housing Act 2004 defines deposits as security held as protection to discharge any liability that may arise in connection to the tenancy and to ensure that the tenant performs their obligations under the agreement.

What are the requirements?

An AST deposit must be protected by one of the following within 30 days of receipt:

  • The custodial scheme – Deposit Protection Services (DPS) which holds the deposit money and is backed by the government; or
  • Insured Scheme – MyDeposit or The Deposit Services (‘TDS’) the members hold the deposit and have insurance to protect the monies.

Once the deposit has been protected, the landlord must provide the tenant a copy of:

  • The certificate of deposit protection; and
  • The prescribed information.

Both of these are provided by the deposit protection providers.

What are the consequences of failing to comply?

Should the tenant bring a claim, the court may order the landlord to repay the deposit in addition to a penalty of one to three times the deposit sum. This is a discretionary penalty and will depend on the facts of the case.

Furthermore, affective from 1 October 2018, in absence of proof of compliance, the Deregulation Act 2015 restricts landlord’s rights of obtaining possession by means of section 21 Housing Act 1988 notice.

Can a tenant bring a claim if the deposit is protected after the 30 day period?

Late protection of the deposit will not restrict the tenant’s right to bring a claim. The same applies to failure to provide the prescribed information.

Why comply after 30 days?

A landlord will not be able to apply for possession under Section 21 Housing Act 1988 unless the deposit has been protected and the prescribed information has been provided to the tenant. As a landlord, it is a necessity to comply with this requirement at all stages and ensure evidence of compliance is obtained from the tenant.

Other benefits:

The DPS provides a cost-effective dispute resolution service for both parties. It provides the landlord an opportunity to make payment without the need for court proceedings within 10 working days of the tenant’s request.

Although this will not prevent the tenant from bringing a claim, should the tenant fail to comply, non-compliance with the dispute resolution service may be taken into consideration by the court when exercising their description to award compensation.

Contributor details:

Please do not hesitate to contact the property litigation team on 02034754321 for any queries that you have in relation to any Landlord and Tenant matters.

This article does not present a detailed statement of the Law and does not constitute as legal advice. This is a summary only and legal advice should always be sought on an individual case basis.

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Posted by Aston

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