Please note: significant changes have been made to tenancy deposit rules since the Localism Act, for which, please see here.
The Localism Bill is now officially the Localism Act.
The tenancy deposit provisions of the Localism Act take effect on 6 April 2012
Of interest to private landlords, in particular, will be section 184 of the Act, which makes significant changes to the tenancy deposit provisions contained in the Housing Act 2004. Highlights of the changes are:
- The time for protecting a deposit is increased from 14 days to 30 days
- The time for supplying the prescribed information is also increased from 14 days to 30 days
- The time limit of 30 days will be absolute, and protection (or providing prescribed information) after 30 days will not prevent a penalty from being payable to the tenant [authors note: but doing so albeit late may well reduce the penalty]
- The penalty payable will be between the amount of the deposit and up to three times the deposit as the court sees fit.
- A former tenant may make a claim for the penalty, overturning the decision in Gladehurst Properties Ltd v Hashemi [2011] EWCA Civ 604.
- Suppose a landlord has failed to protect within 30 days. In that case, the landlord may only serve a section 21 notice by repaying the deposit in full, making deductions that are "agreed" with the tenant or if an application for the penalty has been determined.
- If a landlord has protected the deposit within 30 days but failed to provide the prescribed information, then it would seem late providing of the prescribed information is permissible to serve a section 21 notice.
The changes will apply to any unprotected deposit where the tenancy is in effect on or after 6 April 2012, so the changes apply to deposits received before 6 April but only where the tenancy is in effect on or after 6 April. If this applies, the landlord or agent has 30 days to protect the deposit and issue prescribed information to avoid the new rules.
Suppose a tenancy has converted into an assured shorthold tenancy since 2007, and the deposit is unprotected. In that case, it may be the case that the deposit will now need protection due to the wording of the commencement order.
The new rules don't apply to unprotected deposits where the tenancy was not in effect (ended) before 6 April 2012.
To summarise some common scenarios, the following will apply:
Penalty provisions (see later for section 21 notice prohibitions):
Deposit protected and prescribed information given within 30 days of receiving the deposit
It's all good. No problems! No penalty is payable.
Deposit protected and prescribed information provided on day 45 (so 15 days late)
If the applicant is currently a tenant when the application is made AND a hearing is held whilst the applicant is a tenant, the following will be ordered (without any defence available to the landlord)
- Order the person who appears to be holding the deposit to repay it or order that person to protect the deposit [authors note: strange this has been kept because if DPS is protecting the deposit, no "person" is holding the deposit, but the court is required to make one of those two orders] and,
- The landlord must pay the applicant (tenant) not less than the amount of the deposit and not more than three times the deposit within 14 days. [It is submitted in case the deposit is only 15 days late, the lowest possible amount would typically be ordered].
If the applicant is a former tenant (or was a tenant at the time of application but is no longer a tenant at the hearing), the following will be ordered (without defence).
It is worthy of note that the former tenant will have six years to make a claim [section 5 or 9 Limitation Act 1980].
- The court "may" order the deposit to be repaid to the applicant (the use of the word "may" indicates deductions for rent arrears or damages may be claimed and offset at this stage, or if the deposit has already been repaid, this is unlikely to be ordered) and,
- The landlord "must" pay the applicant (former tenant) not less than the amount of the deposit and not more than three times the deposit within 14 days. [It is submitted in case the deposit is only 15 days late, the lowest possible amount would be payable].
Deposit NEVER protected (nor prescribed information given) by the time of any hearing. Application by a former tenant after four years and landlord has never repaid tenant the deposit:
- The court may order the deposit to be repaid to the former tenant and,
- The landlord "must" pay the applicant (former tenant) not less than the amount of the deposit and not more than three times the deposit within 14 days. [It is submitted in case the deposit is never protected, the highest possible amount would be payable].
Deposit protected within 30 days but prescribed information given on or after day 31
If the applicant is currently a tenant when the application is made AND a hearing is held whilst the applicant is a tenant, the following will be ordered (without any defence available to the landlord)
- Order the person who appears to be holding the deposit to repay it or order that person to protect the deposit [authors note: strange this has been kept because if DPS is protecting the deposit, no "person" is holding the deposit, but the court is required to make one of those two orders] and,
- The landlord must pay the applicant (tenant) not less than the amount of the deposit and not more than three times the deposit within 14 days. [It is submitted in a case where prescribed information is slightly late, the lowest possible amount would typically be ordered].
If the applicant is a former tenant (or was a tenant at the time of application but is no longer a tenant at the hearing), the following will be ordered (without defence). It is worthy of note that the former tenant will have six years to make a claim [section 5or 9 Limitation Act 1980].
- The court "may" order the deposit to be repaid to the applicant (the use of the word "may" indicates deductions for rent arrears or damages may be claimed and offset at this stage, or if the deposit has already been repaid, this is unlikely to be ordered) and,
- The landlord "must" pay the applicant (former tenant) not less than the amount of the deposit and not more than three times the deposit within 14 days. [It is submitted in case prescribed information was slightly late, the lowest possible amount would be payable].
Prohibition of serving a section 21 notice:
Deposit protected and prescribed information given within 30 days of receiving the deposit
It's all good, a section 21 notice may be served at any time, but you must wait until after an authorised scheme is "holding" the deposit before serving.
Deposit protected and prescribed information given on day 45 (so 15 days late)
Even though the deposit has been protected because it was late, a section 21 notice may still not be served without more. To serve a section 21, the deposit must be:
- Repaid in full to the tenant or,
- Repaid with such deductions as are agreed between the landlord and tenant (so offsetting against rent, for example, would need the tenant's "agreement" first) or,
- An application by the tenant has been made under section 214(1) (penalty provisions discussed above), and the application has been determined by the court, withdrawn or settled by agreement between the parties.
Deposit NEVER protected (nor prescribed information given):
No section 21 notice may be served.
Deposit protected within 30 days but prescribed information not given (or insufficient information provided)
No section 21 notice may be served until the prescribed information has been given (the fact that the prescribed information and only the prescribed information is late is OK for serving a section 21 notice, but the penalty would still be payable as above).
