DEPOSIT CHECK

What are the Types of Tenancy Deposit Schemes?

The deposit paid by the tenant should be protected and returned to the tenant at the end of the AST.

Generally, the tenant should ask the landlord how the deposit will be protected. This can be done in two ways: a) by way of Custodial TDS or b) Insurance TDS. The landlord can decide which TDS to proceed with but must inform the tenant of where it is protected, the amount of the deposit protected and how this will be returned to the tenant at the end of the tenancy.

Insurance TDS – this means that the landlord holds the deposit and will have to pay insurance premiums to the administrator of the scheme. The administrator of the scheme can reimburse the tenant from any premiums paid by the landlord if the Landlord dishonestly takes or withholds the deposit.

Custodial TDS- this means that the landlord makes the payment of the deposit to the administrator of the scheme. This must be done within 30 days of the landlord receiving the deposit from the tenant. In this instance, the administrator of the scheme will hold the deposit until the tenancy ends. Once it ends, they will return the deposit to the tenant. They will make sure there are no rent arrears, damages, disputes or breaches of the Tenancy Agreement before returning the deposit.

The time limit for landlords to protect the deposit within an authorised TDS is 30 days from the date of receipt of the deposit where the Landlord receives the deposit on or after 6 April 2012  (if it is before this date then the deadline was 14 days).

There are three ways a deposit can be protected by an approved provider, which are then held in bank accounts regulated by the Financial Conduct Authority. This can be through:

• Deposit Protection Service;
• MyDeposits; or
• Tenancy Deposit Scheme

Some basic details including the Rented Property Address, Tenancy Start Date and Deposit Amount can be searched against to see if the Deposit has been protected by any of the above providers.

If the Landlord Did Not Protect the Deposit, Can They Still Evict the Tenant?

A Section 21 notice is commonly used in order to evict a tenant; however the landlord cannot use this if the deposit has not been held in an authorised TDS or if the deposit was not protected within the specified time period of 30 days.

Can the Deposit be Claimed a Second Time Upon Renewal of the Tenancy?

Where a tenancy ended before 6 April 2012 the tenant may still be able to claim back the deposit. For example, if a fixed term tenancy was granted before April 2007 and becomes a statutory periodic tenancy after this date, then the statutory period tenancy is a new tenancy and the deposit paid after April 2007 must have been registered with the TDS. This applies even if the deposit had been protected in the TDS at the start of the fixed term – it would have to be re-protected when the statutory periodic tenancy commenced and so a section 21 Notice can also not be served by the landlord, otherwise the tenant can claim against this.

Therefore, if a tenancy has been renewed, once or multiple times and the requirements have not been complied with then the same rules apply, as multiple tenancies mean multiple breaches, the landlord may face multiple penalties, financial sanctions and claims brought against them for each breach.

What if there is a Change of Landlord during the Tenancy?

If the landlord changes during the tenancy, this does not prevent any claims that can be made. If the first landlord had failed to protect the deposit in a TDS within the deadline, and has then transferred the original tenancy deposit, the new landlord would not be able to evict the tenant by a section 21 notice due to the previous landlords failure to comply with the regulations. Furthermore, the new landlord would be liable for the penalty as the burden was on them as purchaser of the property to ensure that the first landlord fulfilled its legal obligations.

Will the Landlord return the Deposit to the Tenant?

The landlord must return the deposit within 10 days of the tenancy ending. They must return the whole of the deposit within that time limit. The only way the landlord is entitled to keep the deposit is where they can evidence that they have suffered a financial loss during the tenancy, for example, by way of cleaning costs, damages, and arrears. They cannot use this facility to rely on claiming against the normal and expected wear and tear, nor can they use this for their own advantage, such as to cover the costs relating to re-renting the property.

Whilst the most common consequence of failing to protect a deposit is that the Landlord cannot serve a Section 21 Notice to evict the Tenant, the Landlord may also be required to compensate the Tenant. This option includes the repayment of the Deposit to the Tenant along with financial penalties that the Landlord may incur. These penalties can between one to three times the initial deposit. In such a situation, it is likely that the landlord will take steps to rectify this situation since the onus is on them and they would want to seek possession of the property being rented out.

A report by the centre of Economics Business Research has shown that a total of £514m worth of Deposits are believed not to have been protected in one of the three government-initiated provider schemes in England and Wales.

Has Coronavirus affected the Deposit Protection Schemes?

In the current climate of the Covid-19 pandemic, where a new Tenancy Agreement has been agreed, the landlord can say a deposit is not initially required but will be due at a defined point in the future. The deposit can also be taken in instalments and the landlord should still protect the amount received within 30 days. For a tenancy that is still ongoing, the landlord should not use the deposit for the arrears and should work with the tenant to establish a payment plan.

Finally, it is essential that tenants are aware of their rights to receive the deposit back. We can assist tenants to bring a claim against their landlord. We will take all the information required and then advise on the likelihood of claim being successful. The fees would be assessed on a ‘no win no fee’ basis.

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