Changes to Tenancy Deposit Scheme Rules

Landlords who take deposits need to act fast if they have not already protected them in a tenancy deposit scheme says David Lawrenson of

Today, I was going to comment on the budget, but thus far we cannot see much in it that affects the private rented sector (apart from for very high end properties effected by changes to Stamp Duty Land tax) so I’ll use today’s blog to look at important changes to tenancy deposit scheme rules.

Tenancy Deposits – The History

It is almost 8 years since the tenancy deposit scheme rules were included as an amendment to the Housing Act 2004, with the schemes themselves coming into force on 6th April 2007 in England and Wales.

The schemes were quite successful (if compliance is a measure of successful) and it is thought that the majority of landlords now protect their deposits in one of the three government authorized schemes.

When the original rules for the schemes were drafted, it was recognised that there would be some landlords who would still fail to protect deposits. So, to deal with these cases, the schemes allowed the tenant to go to court and claim a penalty of three times the deposit sum.

But this led to a couple of Court of Appeal decisions which made this virtually unenforceable.  One decision said that the landlord could protect “out of time” and the other said that the clause does not apply once the tenancy has ended and the tenant moved out.

According to Tessa Shepperson at LandlordLaw, these Appeal Court rulings effectively meant that a landlord could protect at any time up to the date before the court hearing and they would also be ‘safe’ and not have to protect at all after the tenant had vacated.

All Change on Tenancy Deposit Scheme Rules

However, this is set to change after 6 April 2012.

From now on, landlords must make sure they protect the deposit in a scheme and ALSO serve the appropriate notice giving prescribed information to the tenant. Landlords who just protect and don’t serve the notice will still be in breach of the regulations.

Also, the following changes come in, again from 6th April:

1. The landlord or agent will have a longer period to protect. Rather sensibly, we think, it will go up from 14 days to a more reasonable 30 days.

2. A landlord can still protect after this time but will not have any defence to a claim by the tenant for a penalty payment. And a tenant will be able to bring a claim for this, both during the tenancy and afterwards, right up until the Statute of Limitations kicks in – which means for up to 6 years after the tenant moves out.

So, for all this time landlords will be at risk if they have not protected the deposit within the 30 days.

3. The penalty payment will go down. No longer will it be  a fixed 3 times the deposit sum, but will be any amount between one and three times the deposit sum – the exact amount will be at the  discretion of the Judge.

4. The new rules appear to be retrospective and will therefore catch all deposits taken before 6 April 2012 which are not protected. There will be a 30 days grace period from 6 April to allow unprotected deposits to be protected.

What Does It Mean for Landlords?

So, landlords who have not protected their deposits and / or served the notice must do so as soon as possible or risk finding their tenants bringing a claim that they will be  unable to defend, even years later.

The new rules also affect section 21 notices.  At present a section 21 notice is unenforceable until the deposit is protected AND the notice with prescribed information is served on the tenant.

After 6, April 2012, this will change and a landlord will NOT be able to correct this by protecting and serving out of time.

Tessa Shepperson comments, “These changes are a bit more draconian than many will expect and we suspect that many landlords, lulled into a false sense of security by the two Court of Appeal decisions, will find themselves having to make substantial payments to tenants in times to come.”

The onus will be on landlords to make sure that this does not happen to them by ensuring that all tenants’ deposits are protected with the proscribed notice issued.

They have only a few days left to act!

In another change, from 6 April 2012, landlords and letting agents will have just seven days to produce an Energy Performance Certificate (EPC) after they’ve started marketing the property for new tenants, rather than the previous 28 day period.

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