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Landlords Beware

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Landlords Beware

The deposit requirements for landlords of residential properties continue to cause problems. They apply to people letting out their home as well as professional landlords.

To recap; for tenancies agreed after April 2007, landlords who take a deposit need to (1) either pay it into an authorised scheme or get what is effectively authorised insurance and (2) give notice with prescribed information of what has happened to the deposit to the tenant. Failure to comply leads to a Court  order for (a)  the return of the deposit and (b) a penalty payable to the tenant of between 1 and 3 times the deposit and (c) an inability to use a cheap and quick way to get a Court Possession Order.

The Courts were initially quite lenient with landlords and so Parliament tightened up the law leaving Judges very little room for manoeuvre when faced with agreements entered into after April 2012 . Now if the deposit has not been protected in an authorised manner and notice given within 30 days, there is normally no defence,  just a plea to issue a 1 times the deposit penalty rather than 2 or 3 times that.

It was thought that tenancies created before April 2007 were safe. Now the Court of Appeal has decided that since a notice to quit (which include what are called section 21 and section 8 notices ) ends the contractual tenancy but automatically creates a statutory tenancy in its place (on effectively the same terms that can only be terminated by the landlord with a Court Possession Order),  that this statutory tenancy is a new tenancy and if created after April 2007 it triggers the deposit requirements!

That also raises the possibility that the Court may in the future decide that when the initial fixed term (usually 6 months) has ended a new “ periodic”  tenancy is created and so the deposit requirements have to be complied with within 30 days of the fixed term ending whether or not a section 21 notice has been served.

Landlords  do not have to comply when a new tenancy follows an old one where the deposit requirements have already been complied with (unless more deposits are taken or there is a change in the parties to the agreement) and it does not apply if the new tenancy is not taken up by the tenant ( i.e if they vacate by the end of the notice period or the end of the fixed term).

Our advice- if in doubt either do not take a deposit or protect it in accordance with the regulations.