A tenant(s) deposit is an important safety-net for landlords. It can be used to recover rent arrears, damages and/or other costs owed at the end of the tenancy. However, legislation introduced by government in April 2007 gives strict rules for landlords. They’re to protect the deposit in an authorised deposit scheme. But they must do it by the relevant timescales in line with the scheme’s initial requirements. Sadly, the residential landlord and tenant team at Woodstock still see landlords and agents getting it wrong. Often unintentionally – years after the legislation came into force.
The relevant timescale to protect the deposit in the authorised scheme is 30 days of receipt from the tenant(s) – if the deposit was taken after 6 April 2012.
Failure to comply with the deposit scheme’s initial requirement can lead to additional costs and delays. For example, the tenant(s) can claim the return of the deposit plus one to three times the deposit sum as compensation. It will be awarded at the judge’s choice (if deposit claim issued at the court). Additionally, the landlord will be stopped from serving a valid section 21 notice until the deposit is returned to the tenant(s).
To make it more complicated, each deposit scheme has their own terms and conditions. Initial requirements that landlords and agents must comply with. Therefore, I advise all landlords and agents to carefully read and understand the terms and conditions relating to their deposit scheme to ensure compliance.
It is particularly important landlords and agents understand what action must be taken to ensure the deposit is protected in the deposit scheme. This needs to be done by the relevant timescales. Chiefly, because further action may be required after the deposit is sent to the scheme before it is protected.
In this article, I will discuss a recent case relating to the protection of a custodial deposit in the DPS deposit scheme. I have set out the initial requirements for DPS below:
“The Initial Requirements are those actions the Landlord has to complete within 30 days of receipt of a Deposit under the Housing Act 2004.
They are:
– to protect the Deposit in a government-authorised scheme like ours; and
– to give the Tenant a copy of the Prescribed Information.”
The tenant paid the deposit to the managing agent on 20 May 2022. The managing agent sent several deposits to DPS via bank transfer on 1 June 2022, including the deposit taken by the tenant for our client.
Paragraph 11 of the DPS’ terms and conditions sets out how the deposit can be paid to the DPS. Paragraph 11(i) explains whether the deposit paid via bank transfer can be automatically allocated to the deposit account. Or whether it must be manually allocated to the correct deposit account. In this case the managing agent sent several deposits to DPS in one lump sum. Each deposit then had to be manually allocated to the account as stated under paragraph 11(i)(c) of DPS terms and conditions, which read as follows:
“It is the landlord’s sole responsibility to manually allocate funds in order to ensure that the Deposit is protected.”
The managing agent manually allocated our client’s deposit to the appropriate deposit account on 24 June 2022. Thereafter, DPS sent a deposit certificate stating the date of protection is 24 June 2022. Which is beyond the 30-day requirement and in breach of the deposit legislation.
Unfortunately, in this case, the tenant is entitled to the return of the deposit. They could also claim one to three times the deposit sum as compensation. If the tenant files a deposit claim at the court, it is important to remember that the court has discretion regarding the award. Which it would likely be a lower scale where there is an innocent mistake by the landlord and/or agent.
In the above example, it is advisable to try to settle the deposit claim without commencing proceedings to reduce costs and delays. And this is supported under the Civil Procedure Rules that govern civil litigation.
Do you have any concerns or questions regarding the deposit protected? Please, do not hesitate to contact Woodstock Legal Services for further guidance. Please note the dates given above have been altered to protect our client’s identity with this ongoing case.
My landlord changed the scheme days into my tenancy thus making the first scheme/certificate invalid. Then days after that proceeded to cancel the second certificate , having decided to go back to the the first scheme for protection. She nor the letting agents checked that this first scheme still covered the deposit ( which they didnt) So the deposit wasnt covered. We didnt know until I contacted the first scheme, when the landlord ignored all my texts to return my deposit. I immediately let her know she wasn’t covered and she failed to check with the scheme at all, just deflecting and making up al sorts of fabrications. She insisted eventually that she was covered but had failed to engage with the scheme at all, ignoring all their correspondence. She failed to follow the protocol for disputes and negotiations.
She flatly refuses to take accountability for failing to ensure the deposit wasn’t covered and has now accused me of all sorts of falsehoods to scare my lawyers off going to court. At one stage, she offered me a small amount of my deposit back ( after many weeks) but did not send that to me. My lawyer has advised that the judge will be very lenient because it was a mistake and now after many months of being ill, the landlady has said the landlord is terminally ill so we may not win anyway. ( the landlord has never dealt with admin or finance- it was always his company secretary who has major control over the company) How are they able to just ignore all the proceedors laid down and ignore and stonewall and then get away with it?