Why it’s vital landlords stick to the letter of the law when it comes to tenant’s deposits

An important reminder that landlords need to make sure they not only protect tenants' deposits but crucially, also give what's known as prescribed information within a specified timescale to the correct people, has just been delivered in a county court judgement.

In this case, Wood v Arkley, when the landlord, Wood, served a section 21 eviction notice, it was challenged on the basis that prescribed information - which covers details including which government-backed Tenancy Deposit Protection (TDP) scheme a deposit has been placed in - was not provided to a relevant person.

In this case, the relevant person was the tenant's father who had paid the original deposit but had not been provided with the requisite prescribed information.

He countered the landlord's section 21 notice with a defence and counterclaim, to which, significantly, the landlord submitted no defence. As a result, the possession claim was dismissed and the landlord not only had to pay damages on the counterclaim to the tenant's father of £1,425 but also legal costs of £11,675.

What does the law say on tenants' deposits?

The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015 says landlords must protect tenants' deposits within 30 days of receipt and serve prescribed information, also within this 30 day period, to both the tenant and any relevant third parties who have paid all or part of the deposit, for example, as in Wood v Arkley, the tenant's father.

Failure to do this means any section 21 notice served will be invalid meaning the landlord can't pursue an eviction. Furthermore, the tenant can claim a penalty award against the landlord which can be as much as three times the deposit sum.

Who do these rules apply to?

These rules currently apply to Assured Shorthold Tenancies (ASTs) granted on or after 1 October 2015 in England only.

But from 1 October this year, except for the requirement for the landlord to provide prescribed information about the rights and responsibilities of each party under the AST, the new rules will apply to all ASTs.

How does a landlord protect a tenant's deposit?

Landlords or letting agents must put a tenant's deposit in one of the following government-backed TDP schemes within 30 days of receiving it so that the tenant knows it is safe. These are:

• Deposit Protection Service;
• My Deposits;
• Tenancy Deposit Scheme

What exactly does prescribed information cover?

It includes a copy of the deposit protection certificate and the deposit protection scheme information leaflet, given to landlords by whichever TDP they have decided to use.

Prescribed information also incorporates:

• The name and details of the TDP used and its dispute resolution service;
• The conditions under which some or all of the deposit may be retained by the landlord;
• How the tenant can apply to get their deposit back;
• What the tenant can do if they can't get hold of the landlord at the end of the tenancy;
• The steps to take in the event of a dispute over the deposit.

What happens if the landlord does not protect the deposit and/or serve the prescribed information?

As stated earlier, the landlord is liable to the tenant for a penalty of up to three times the deposit sum and cannot serve a section 21 eviction notice.

This problem can be solved by serving the prescribed information first, because even serving it late allows the section 21 notice to then go ahead.

But importantly, some legal experts warn, when the deposit has been put in a TDP according to the regulations but the prescribed information hasn't been served, judges are taking the view that landlords must refund a tenant their deposit money before serving the section 21 notice.

The moral of the story? Complying with these regulations from the outset undoubtedly saves time, money and a lot of hassle.

See what else we've written on landlord and tenant issues:

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For more information about landlord and tenant disputes, please contact Wards Solicitors' Disputes Team