Machins Solicitors LLP
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Landlords Must Protect Deposits

Posted: 30th March 2016   In: Dispute Resolution, Commercial Property

A common pitfall that landlords fall into is a failure to protect their tenants’ deposits. Deposits must either be paid into an authorised scheme or be registered and insured with such a scheme. These schemes are known as Tenancy Deposit Schemes (TDSs) and became compulsory for all residential Assured Shorthold Tenancies (ASTs) created on or after 6 April 2007 and were created under the Housing Act 2004.

The purpose of TDSs is that they are intended to prevent a landlord from failing to return a tenant's deposit and to ensure a landlord is not left out of pocket when a tenancy expires and a tenant leaves the property. The parties to the AST cannot contract out of the above obligation.

If a landlord fails to join a TDS, they will be liable to financial penalties and may be prevented from recovering possession of their property from the tenant. If the deposit protection regulations are not complied with fully, it may invalidate any Notice Requiring Possession (a s21 Notice) already served and prevent them from serving a valid s21 Notice until some rectifying action is taken.

Landlords are also obliged to give tenants full written details, including the scheme reference number which is known as the Prescribed Information. The landlord must give the tenant the Prescribed Information within 30 days of receipt of the deposit if the deposit was received on or after 6th April 2012 (previously 14 days). Failure to serve the prescribed information means that the landlord cannot serve a valid S21 on the tenant, and the tenant could ask the court to make the landlord pay a penalty up to three times the amount of the deposit.

However, where the landlord merely fails to provide the prescribed information, a valid section 21 notice can be served once the prescribed information is eventually provided to the tenant.

For further adviceon any aspect of commercial property law, please contact either Janice Young or Gavin O'Donovan.

Posted by: Janice Young
Dispute Resolution
Luton Office