Evicting a tenant under an assured shorthold tenancy (‘AST’) should be a relatively stress free process, and usually it is. However, in recent times we are seeing somewhat of an upward trend in tenants challenging possession notices and claims, especially when possession is sought under Section 21 of the Housing Act 1988. This update aims to serve as a reminder of the requirements that a landlord must follow in relation to tenancy deposits, and how to avoid pitfalls and headaches when it comes to seeking possession if a deposit has not been dealt with correctly.  

What must a landlord do with a tenancy deposit?

It is now well known to residential landlords and letting agents that a deposit paid in connection with an AST must be protected with a government approved scheme, the initial requirements of the scheme complied with and prescribed information given to the tenants and any relevant persons (who may have paid the deposit on behalf of the tenants), within 30 days of receipt. This timeframe had been extended from 14 days with effect from 06 April 2012.

What is the ‘prescribed information’?

The prescribed information that has to be given to the tenants in full is set out in The Housing (Tenancy Deposits) (Prescribed Information) Order 2007. This information must be certified by the landlord (or its agent) and the landlord must confirm the following:

• The information provided relating to the deposit scheme is accurate to the best of the landlord’s knowledge and belief; and

• The landlord has given the tenant an opportunity to sign any document containing the prescribed information provided by the landlord to confirm that the information provided is accurate.

There is both generic and specific prescribed information about the deposit that must be provided:-

Generic Prescribed Information:Specific Prescribed Information:The name, address, telephone number, e-mail and any fax number of the authorised tenancy deposit schemeThe amount of deposit paidAny information contained in any leaflet supplied by the scheme to the landlord explaining the operation of sections 212-215 of, and Schedule 10 to, the Housing Act 2004The address of the property to which the tenancy relatesThe procedures under the tenancy deposit scheme by which a deposit amount may be paid or repaid to the tenant at the end of the tenancyThe name, address, telephone number and any e-mail or fax number of the landlordThe procedures where either the landlord or the tenant cannot be contacted at the end of the tenancyThe name, address, telephone number and any e-mail or fax number of the tenant, including details to be used at the end of the tenancyThe procedures that apply under the scheme where the landlord or the tenant dispute the amount to be paid or repaidThe name, address, telephone number and any e-mail or fax number of any relevant personThe facilities available under the scheme to resolve a dispute without the need for litigationCircumstances when all or part of the deposit may be retained by the landlord, by reference to the terms of the tenancy agreement

It is not enough to simply direct a tenant to the required information, it must be provided in full. In Ayannuga v Swindells [2012], the Court of Appeal held that it is not sufficient to identify the scheme and let the tenant make their own investigations, regardless of whether the information is freely and easily available on the scheme provider’s website, for example. The Court of Appeal rejected the landlord’s suggestion that certain items in the list of prescribed information were procedural matters only. The Court found that all items were matters of substance, and must be provided to the tenant in full. The prescribed information includes any information contained in any leaflet required by the scheme administrator to be given to the tenant.

What are the sanctions for non-compliance?

If the deposit is not protected and the initial requirements of the scheme not complied with within the relevant timeframes, the landlord cannot serve a Section 21 notice seeking possession unless and until the deposit is returned to the tenant. If the prescribed information is not provided in full within the relevant timeframes, the landlord cannot serve a Section 21 notice unless and until the full prescribed information is given. In addition, in both cases, the landlord may be liable for financial penalties (see below).

The tenancy deposit rules came into effect on 06 April 2007 and although a landlord is not obliged to protect a deposit taken in connection with an AST which was granted and became periodic before this date, the deposit must be protected or returned to the tenant before the landlord can serve a Section 21 notice. Where a deposit is taken before 06 April 2007 but the AST became periodic after this date, changes introduced by the Deregulation Act 2015 gave landlords until 23 June 2015 to protect the deposit and provide the prescribed information, failing which the sanctions above apply, notwithstanding the deposit having been taken before the rules came into effect.

How much are the financial penalties?

Where the tenancy deposit rules have not been complied with, the tenant may make a claim against the landlord for a financial penalty between one to three times the value of the deposit. This may be a standalone claim or as a counterclaim to a possession claim, pursued on either Section 21 or Section 8 of the Housing Act 1988. If non-compliance is proven, the Court has no discretion whether to make an award, but the value is at the discretion of the Court.

The amount of the financial penalty awarded is assessed by reference to the culpability and experience of the landlord. At one end of the scale will be cases where there has been a failure to protect a deposit through no fault of the landlord, in which case an award at the lower end would be appropriate. At the other end of the scale will be cases where there has been a flagrant disregard for the rules, and the deposit has been dissipated in some way, in which case a higher award would be justified.

Should you have any queries relating to tenancy deposits, we would be happy to help.

For more information, please contact Faye Didcote at Faye.Didcote@kdllaw.com or telephone 01435 897297.

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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