The deposit regulations set out strict requirements to protect the deposit in an approved deposit scheme within a specified deadline and provide key information to the tenant. Importantly, the deadline to protect the deposit will vary depending on when it was first taken:
- If the deposit was taken between 6 April 2007 and 5 April 2012 – it must be protected within 14 days of receipt.
- If the deposit was taken after 6 April 2012 – it must be protected within 30 days of receipt.
Failure to protect the deposit within an approved deposit scheme before the deadline will amount to a breach of the deposit regulations. In this event, the tenant will be entitled to 1 to 3 times the deposit plus the return of the deposit. This means that the landlord will be at risk of a claim being issued against them by the tenant to seek the above entitlement and court costs.
Remember, you cannot serve a valid Section 21 notice until the full deposit has been returned to the tenant.
How to Avoid Court Proceedings in Deposit Disputes
In the event of a deposit dispute, tenants may choose to instruct a solicitor to contact the landlord, requesting the maximum entitlement, which typically includes three times the deposit amount and the return of the deposit. If the issue is not resolved through negotiation, court proceedings may be initiated.
However, it’s essential to note that in cases where an honest mistake has been made by the landlord in protecting the deposit on time, a Judge may be inclined to award a reduced penalty of 1 or 2 times the deposit sum, along with the deposit return, instead of the full penalty.
To prevent the matter from escalating to court proceedings and incurring associated costs, our partners Woodstock Legal Services strongly recommend that landlords and tenants engage in further negotiations to find an amicable and reasonable resolution. If both parties agree to settle the dispute, it is advisable to draft and sign a formal settlement agreement that clearly outlines the terms of the settlement. Any compensation offered by the landlord to the tenant should be made in full and considered as a final settlement of any deposit-related claim against the landlord.
By pursuing amicable solutions and documenting them in a formal settlement agreement, both landlords and tenants can effectively avoid the complexities and expenses of court proceedings, while achieving a fair resolution to the deposit dispute.
The deposit rules are complicated, and mistakes can happen. However, it is important for the landlord to consider their position and the likely outcome if court proceedings were commenced before agreeing to any offer made by the tenant to avoid court proceedings.
If you need any assistance with respect to the deposit regulations and/or settlement, please do not hesitate to contact Woodstock Legal Services’ expert team by visiting www.woodstocklegalservices.co.uk or calling 0330 088 5792.
by Alex Giblett