Landlords, time is ticking to register deposits

Year Published: 2015

As a landlord, the law is notoriously tenant-biased, making you jump through a variety of hoops if you want to obtain possession of your property back from the tenant. As a solicitor, I see cases fairly frequently where, despite holding a tenant’s deposit in an approved deposit scheme having been law for a number of years now, landlords don’t always get the registration quite right, and getting it right at the beginning is the key.

Unusually, the law is not currently an ass, as landlords are being given a bit of leeway, or as I have been calling it, an amnesty, to allow them to get their houses in order. My advice? If you need to take advantage of it, do. The ramifications of not doing so may not be an easy pill to swallow.

When a tenant enters a property, most landlords will take a deposit. It is law that upon receipt of the deposit, it must be registered in one of the approved deposit schemes and the prescribed information must be served upon the tenant (and the person the deposit came from if different). Both have to be done and even if a lettings / management agent is employed to do this, my view is that it is still the landlord’s responsibility so make sure it’s done.

If it is not done, not only does a landlord lose the right to utilise the Section 21 procedure (the procedure deemed as quicker and easier to evict a tenant), but the landlord may end up losing the deposit and be ordered to pay to the tenant a sum equal to three times the value of the deposit as a penalty. So, for example, if you rented out a house at £500 per month, and the deposit was equal to one month’s rent at £500, you could be facing a fine for the deposit plus three times the value of the deposit. If the deposit was not registered and the necessary information was not served upon the tenant, you could restrict your actions in the future and find yourself on the wrong end of a claim for £2,000 (plus court fees, interest and possible legal costs too).

There has been some confusion due to recent case law as to how to potentially get around these points but the Deregulation Act 2015 has made it very clear how you are now to proceed. The law has now allowed landlords some breathing space and employed an amnesty to allow them to get everything in order before the Act really comes into force later this month.

Now, all deposits, whenever they were received, should really be registered. Landlords have until 23 June 2015 to do this without running the risk of incurring the penalties. If you have not registered the deposits and not served the prescribed information, you will not be able to utilise the Section 21 possession procedure.

So my advice is to register all of your deposits if you have not already done so. And don’t forget the prescribed information – this is a two-step process and both steps need to be completed before 23 June 2015.

Going forwards, all landlords will have 30 days from receipt of the deposit monies (so be careful if taking monies before the actual start date of the tenancy) to register the deposit and serve the prescribed information.

In order to save yourself the headache when you need to remove the tenant from your property, make sure you comply with the steps at the beginning of your tenancy. But do so quickly if you need to take advantage of the amnesty. Time is ticking ….

For further advice on landlord and tenant matters, please contact our  Dispute Resolution team on 0161 475 7676.

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