Late Deposit Protection | Could your landlords be at risk of committing multiple breaches

Most landlords know that the tenant’s deposit must be protected in an approved deposit scheme within 30 days of receipt – otherwise the tenant can claim between one and three times the deposit sum in damages, plus the return of the deposit. 

However, many landlords and agents may not be aware that the tenant can make a claim for each individual tenancy agreement.  

At the end of a fixed term tenancy agreement, if a tenant does not vacate the property, then the agreement becomes a statutory periodic tenancy rolling on the same terms as the original contract. In a Court of Appeal case (Superstrike Ltd vs Rodrigues), it was held that a Statutory Periodic Tenancy is not a continuation of a fixed term tenancy; it is a brand-new tenancy.

Unfortunately, this case has opened the floodgate to opportunistic tenants trying to inflate their deposit claims against landlords by also including statutory periodic tenancies as a new tenancy and therefore another breach of the penalty.

For example: If the tenant paid £600 deposit and there were four tenancies (including one statutory periodic tenancy) then the tenant may try to claim damages totalling £7,800. This is based on the following calculations: 

• £1,800 (three times the deposit sum)
• £7,200 (four times representing each tenancy agreement)
• £600 for the return of the deposit).

Whilst there have been many attempts by landlords to avoid paying multiple breaches, the legislation did not clarify this point.

Indeed, there is an argument that the government didn’t intend to allow multiple breaches; however, the question whether multiple breaches apply remains unclear.

But, in the recent case of Sandor Szorad & Eszter Andrea Kozma v Pritpal Singh Kohli [2023] EW Misc 12 (CC) – the Court of Appeal overruled the County Court’s decision of three times the deposit for one breach only and ordered the landlord to pay: three times the deposit sum for the first breach, two times the deposit sum for the second breach and the return of the deposit.

This case is interesting because it allowed multiple breaches and calculated each breach separately by granting a reduced penalty for the second breach (rather than three times the deposit for both breaches).

The deposit rules can be complex, and it is not surprising that they have caught many landlords unaware of their potential liability. Landlords should be wary as there appears to be an increase in these types of claims.

Proof, if ever it was needed – that agents should always protect their landlord’s investment asset with sophisticated pre-tenancy software which ensures the correct documentation is always issued, and a full audit trail can be provided.

To learn more about the clever integrations and useful documentation within BOX, speak to our team today.