In this week’s Legal Update, we provide a reminder of the legal requirements when it comes to handling of deposits paid by tenants in connection with Assured Shorthold Tenancies (ASTs).

We need not remind readers that, since 06 April 2006, deposits paid in connection with ASTs must be protected with a Government approved scheme, the initial requirements of the scheme complied with and the prescribed information about the deposit provided to the tenant. There are prescribed time periods for doing so and penalties that apply for a failure to comply, depending on when the deposit was taken. The table below summarises the legal requirements :

**Following Deregulation Act 2015 changes, the landlord is deemed to have complied with the tenancy deposit rules in relation to the statutory periodic tenancy (e.g. on expiry of the fixed term) if it has complied with the above requirements for the initial fixed term tenancy.

Points to note

• The deposit must consist of money only (and not other property).

• Following changes introduce by the Tenant Fees Act 2019, the amount that can be taken as a  deposit is limited to five weeks’ rent (or six weeks’ rent where the annual rent is £50,000 or more).

• Unless otherwise stated, failure to comply with the requirements within time periods stated entitles a tenant to claim financial penalties from their landlord of up to three times the value of the deposit for each breach - both during and after the fixed term.

• Unless otherwise stated, the landlord is unable to serve a Section 21 Notice to seek possession of the property where the deposit is not protected and the initial requirements of the Scheme are not complied with in time, unless the deposit is first returned to the tenant.

• The landlord can serve a Section 21 Notice where the prescribed information is given to the tenant late, but they may still be held liable for financial penalties.

• The prescribed information includes information contained in any booklet required to be given to the tenant by the Scheme Provider - so always check the Scheme rules.

• A letting agent can be held liable for the financial penalties, where they have taken the deposit on behalf of the landlord and failed to protect it.

• Landlords or their agents dealing with the deposit should make accurate records of dates, times and methods of service of the prescribed information. Where possible, insist that the tenant signs and returns certificate contained in the prescribed information to confirm receipt.

• The Court of Appeal confirmed in Northwood Solihull Ltd -v- Fearn & Ors [2020] that the certificate containing the prescribed information does not have to be signed in accordance with the Companies Act 2006 (where signed by a corporate body by or on behalf of the landlord) - see here. 

• The prescribed information is required to be given to the tenant and anyone else who paid the deposit on the tenant’s behalf.

Dealing with tenant deposits should, in most cases, be relatively straight forward, however the strict rules are rife for disputes particularly when it comes to a landlord wishing to serve a Section 21 Notice to recover possession of their property. Such disputes can be time consuming and costly, both in terms of legal costs and any financial penalties which the landlord may be required to pay. Therefore if you have any concerns, legal advice should always be taken.

Please feel free to contact a member of the team on 01435 897297 or info@kdllaw.com should you have any queries whatsoever.

Disclaimer

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

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