Failure to Protect Tenancy Deposit Claim?

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You shouldn’t have made deductions if you were aware that you hadn’t registered the deposit in time. You put yourself in a vulnerable situation by doing so.

From a common sense point of view the 6 year limit you mentioned would only start once the tenancy ends.

When you registered the deposit in 2018 was it the full deposit amount ? If so then the deductions you have “made” since the tenancy ended would have to be agreed by the TDS and the tenant, before the TDS releases any of the deposit monies. So I am struggling to understand how you could possibly make these deductions yourself.
However if you made these deductions before you placed the deposit with the TDS then you did not of course registered the deposit in full and you are definitely in breach for not registering the deposit correctly. In this case I would ask your tenant what amount of compensation had he in mind and look to settle.

Your were in breach on the 31st day of the tenancy ie August 2013.

You rectified the breach in 2018 - did you forward ALL the required docs to the tenant ie Prescribed Information? Deposit certificate? Reference number under which the deposit was now protected?

I believe that the 6 years limitation rule probably expires in December 2024 so your tenant doesn't fall foul of that loop hole.

Your tenant actually is being quite decent in " seeking reasonable offers about compensation to settle this matter to avoid the costs of going to court.”

The fine is potentially unlimited but generally will be equal to three times the amount of the deposit plus the deposit itself. I would offer your tenant 50% of the deposit x 4. It could also be an allowable expense against tax?

Your tenant, and a p#ssed off tenant, has nothing financially to lose by going to court as you would be paying their costs too and more to gain.

This has been via the courts, Lowe v Governors of Sutton’s Hospital, although a lower court so it's not set a precedent. The 6 year starts from when the action to cause the money to become due.
In this case it's 30 days after the money is handed over. So in this case, it's statue barred. But get legal advice to back up your corner.

I disagree with it, morally, as a tenant may not know it's protected until they try to lodge a claim. But legally it does make sense.

Reply to the comment left by Jonathan Willis at 03/06/2024 - 18:42
Think you will find the clock starts ticking from when the tenancy ends , not from when he placed the deposit in the scheme. So the tenant has until 2030 to make a claim.
I am a bit of loss as to how the landlord made deductions from the deposit without input from the TDS administration, usually they have to agree any deductions . Plus the deposit earns interest after a certain period of time, so between 2013 and 2018 the deposit would have earned interest so the amount lodged with the TDS should have been the initial deposit plus 5 years interest, if you have only lodged the original deposit you have clearly broken the law .
I would pay the tenant a reasonable amount, if he takes you to court you will get your ass well and truly slapped.

Cheaper to settle than go to court.

I no longer take deposits, not worth the hassle, TDS nearly always sides with the tenant, I just invest in checking my tenants credit and rent history and if in doubt just say no .

Upon my reading of the law and cases on this point, the limitation period starts from the 31st day after the deposit is received (or deemed to be received in respect of the statutory periodic tenancy).

We are happy to assist further.

Reply to the comment left by White Collar at 04/06/2024 - 08:17
Not saying you are wrong, but my understanding of tenancy law the clock starts ticking from the end of the tenancy as the deposit was part of the tenancy and not a separate agreement.

You also has to remember a deposit earns interest from the 133rd say of the landlord receiving it . So he first received the deposit in 2013 and only put it into the TDS in 2018 . He doesn't make clear weather he put the initial deposit into the scheme or the deposit plus interest, he should had done the later and failure to do so is a massive red flag . Plus he seems to have made deductions without the approval of the TDS which you are not meant to do.

He should just come to a agreement with his ex tenant or expect a large legal bill and paying his ex tenants a lot of money.

Just remember the deposit and the tenancy agreement are the same legal agreement and not separate.

Reply to the comment left by Tom Jenkin at 04/06/2024 - 08:24
The 6 year limitation begins 30 days after receipt of the deposit. The clock would restart on the date a tenancy becomes statutory periodic and protecting the deposit in 2018 may have restarted the clock again, particularly if mistakes were made with the prescribed information. However, unless the tenancy has been subsequently renewed, the tenant would appear to be time-barred from making a claim.

There are two types of deposit schemes, one of which is insurance based, so you don't have to pay full deposit into the scheme, you pay a small amount insurance to protect your deposit, I suppose this is the method you have used to protect the deposit in first place. I note your tenancy agreement was signed prior to October 2015, it may be worth looking into this, as many required prescribed information are not compulsory before this date. If you were a member of NLA, it may be worth giving their advice line a call, they maybe to assist.