Deposit protection, ‘Prescribed Information’, and what this means for landlords

Introduction

Landlords have a legal obligation to protect their tenant’s deposit in one of the registered scheme. The three recognised deposit scheme providers operating in England and Wales are: My Deposits, the Tenancy Deposit Scheme and the Deposit Protection Service.

If a landlord fails to protect their tenant’s deposit in one of the above schemes within 30 days of receiving it, the landlord can be liable to pay a penalty of up to 3 times the deposit amount. Non-compliance with the protection requirements can also adversely affect any possession proceedings.

If the tenancy began after 6 April 2007, a landlord is also required to serve the ‘Prescribed Information’ on the Tenant following the deposit being protected..

The Law

Section 213 of the Housing Act 2004 refers to the requirements in relation to tenancy deposits. Section 213(3) confirms that the tenancy deposit must be protected within 30 days beginning with the date that it is received. Sections 213(5) and 213(6) relate to the prescribed information; stating that this must be served in the prescribed format and within 30 days of receiving the deposit.

The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 details what the ‘Prescribed Information’ must include. If this information has not been served at the commencement of the tenancy, it can be served later and in any event prior to the service of any eviction notices (Section 8 or Section 21). The non-service at the commencement of the tenancy will not be detrimental to a possession claim but must be rectified and may still leave a landlord open to financial penalties.

Penalties

Should a landlord protect the deposit later than the 30-day period, the penalty sum imposed by the court will be between 1 and 3 times the amount of the deposit. This is in accordance with Section 214(4) of the Housing Act 2004.

Breaches on the minor end of the scale, such as protecting the deposit slightly later than the required 30 days, typically incur a penalty of between 1 and 1.5 times the deposit amount. On the contrary, more serious breaches (such as complete non-protection or protection significantly later) could result in the penalties up to 3 times. The court may also consider how ‘experienced a landlord’ is and whether there were any mitigating factors which led to their failure to comply with the rules. 

The effect on possession proceedings 

If a Landlord wishes to commence Section 21 (‘no fault’) possession proceedings and they have not protected the deposit, they will be required to rectify this breach by returning the deposit in full to the tenant. Once this has been done, a valid Section 21 Notice can then be served. 

If the deposit was protected (late) within a scheme, the landlord must request the return of the deposit through the designated scheme.; they cannot simply use their own funds to refund an equivalent sum.

The potential difficulty in this situation is that a tenant can delay the return of the deposit through the scheme by failing to co-operate. Until the scheme confirms that the deposit has been returned to the tenant, the landlord will be unable to serve a valid Section 21 Notice.

In cases where this happens, the landlord may request the release of the deposit and may attempt to personally deliver the deposit in cash to the tenant. This will normally be sufficient to prove to the Court that the deposit has been returned and, thereafter, the Section 21 Notice can be served.

Where a landlord wishes to commence Section 8 possession proceedings against the tenant because there has been some ‘fault’ on their part (i.e. rental arrears or anti-social behaviour), there is a risk that the tenant may file a Counterclaim for failing to protect the deposit (on time or at all). This could then be use to try and offset the arrears, and may prevent the landlord from relying upon the mandatory grounds (such as 2 months or higher of rent arrears) to obtain possession via the Section 8 route. 

Therefore, a landlord may consider returning the deposit prior to serving a Section 8 Notice to try and minimize the risk. Whilst evidence of deposit protection is not currently required in Section 8 proceedings, the risk must still be considered when analysing the prospects of any claim.

If you are a landlord seeking advice upon a potential claim against you for failing to properly deal with a tenant’s deposit, or you are a tenant who is concerned that your deposit may not have been protected in time, please contact Olivia Gunn on oeg@deanwilson.co.uk or 01273 032349.