New Deposit Service launched

Reply to the comment left by "Melvin Edwards" at "10/09/2014 - 04:02":

You have failed to comply with the law.
Theree is no defence.

Perhaps she suggested this so that she can later claim against you in the hope of being awarded 3 times the deposit.

Reply to the comment left by "Neil Patterson" at "09/09/2014 - 10:40":

38% does not sound a lot to me.

Remember that this is 38% of those seeking help in evictions; it is not suggesting that 38% of landlords have not protected the deposit.

38% of a small number is an even smaller number!

Reply to the comment left by "Alan Loughlin" at "09/09/2014 - 10:53":

The Deposit Protection legislation was not intended to do anything for landlords: it was designed to protect tenants from bad landlords, which it does if the tenants know about the law.

Unfortunately
1. it does little for those such as immigrants who know nothing about the law and thus are still prey to bad landlords, and
2. it was not rigorous enough to protect those landlords who complied with the spirit of the law but failed to comply with the implications of an earlier law.

Reply to the comment left by "Alan Loughlin" at "09/09/2014 - 14:57":

You seem to have a firm grasp of deposit protection law Alan. I can see how this work around of yours could be attractive. I just wanted to know if this idea has ever been tested at court?

You say that if there is a whisper of repaying the money, it becomes a deposit. I would disagree with this. The definition given the Housing Act 2004 does not revolve around the money being repayable but upon the reason it was taken:

“tenancy deposit”, in relation to a shorthold tenancy, means any money intended to be held (by the landlord or otherwise) as security for—

(a)the performance of any obligations of the tenant, or
(b)the discharge of any liability of his,

arising under or in connection with the tenancy."

I'm sure you can see where I'm going with this.

The tenants argument would be that they paid money that was held by you to discharge future liability. It cannot be a 'fee' as the liability has not arisen yet.

If you use this money, or intend to use this money, to put right any damage the tenant has done it can only ever be considered a deposit as it is used to discharge a liability arising out of the tenancy agreement.

As I said, I'd like to know if your 'fee' has ever been dispute at court. There is, at least, half an argument to suggest it's a deposit.

For Melvin Edwards - did your tenant put this request in writing to you? If not, I agree with the other posts on here, it would just be your word against your tenants and at the end of the day it is your responsibility to take charge and comply with the law. There are serial renters out there who will use the law to their advantage.... thoughts of getting 3 x their deposit returned AND with a landlord who would not be allowed to serve Section 21 notice is a good incentive for these tenants. Having said that, in all likelihood this is just an innocent request from someone who knows no better (your tenant) and hopefully this will all work out for you. Just a lesson learnt for the future.

Reply to the comment left by "Melvin Edwards" at "09/09/2014 - 12:53":

I'm afraid legally you cant do this, it is a legal requirment to protect the deposit, your tenant cant ask you not to.

It would be like giving a policeman a note from your mum saying she'd asked you not to wear your seatbelt... note or no note you have still broken the law.

I would protect that deposit ASAP or return it to her

re comments by George.
you made some interesting observations, thanks for that. No this has never been tested in court, we have used the system for six years now, and had two forced evictions, one of which was backed by council legal services (which I made a formal complaint about) but was concluded successfully, so I am sure they would have picked up on it. I do have it on the contract as admin fee, non-refundable.
Fees do not come under deposit legislation, agencies, and landlords charge these under various names but these never are protected, my understanding is by calling it a fee it does not need any protection, just like those charged by letting agencies etc.
I wonder then what would happen if a tenant paid several months rent upfront, surely as rent this does not need protecting, any moneys that are protected being potentially refundable, rent would never be in that category, nor would money for a fee,

Reply to the comment left by "Alan Loughlin" at "11/09/2014 - 15:18":

Hi Alan

Thanks for taking the time to write back. I understand what you are saying.

Rent in advance was dealt with by the court in Johnson v Old [2013] EWCA Civ 415. You're perfectly correct, this money does not need to be protected as it's an existing obligation not a future obligation (or liability).

In that case, at paragraph 36, Sir John Chadwick drew the distinction "between money paid to discharge an existing obligation and money paid with the intent that it be held as security for the performance of some other (primary) obligation or as security for the discharge of some other (primary) liability.

Money paid in order to discharge a current liability is not paid with the intention that it be held as security for the discharge of that liability. The payer's intention is that the liability will be discharged by the payment itself; and so there can be no need to provide security for the discharge of the liability in the future."

The same reasoning can be applied to your fee. The landlord's argument being that it is a current obligation to pay the fee that is discharged at the moment it is paid (and therefore cannot be a deposit).

Always have in mind the courts ability to see through 'sham' arrangements. The true test should always be 'What is the money used for?' Simply calling it a fee is not enough.

Also, bear in mind the Consumer Rights Bill (at committee stage before House of Lords next month) which changes the law surrounding these types of fees.

Paul, you say "The only way a landlord can legally evict a tenant who will not move out voluntarily (and who is not in arrears or in breach of their tenancy agreement) is via a court order for possession, but in order to obtain this, a landlord must first return the deposit."

What happens if you return the deposit, but fail to obtain the court order?

I agree with Alan that if the money is conditionally refundable then it will most likely be deemed a deposit because, in that case, it is hard to argue that it is not a security.

As long as the tenant is charge an admin fee, there is no issue. In fact tenants are used to pay hundreds in admin fees thanks to lettings agents 😉 so I guess you could charge a fair amount and ask for a deposit.

One aspect to consider is that if that fee is not an admin fee, but indeed a one off payment for the tenancy, then I think that it makes that fee a premium, which makes the tenancy a premium tenancy.

For an overview of the potential implications, see Mark's and Tessa Shepperson's posts on the issue:
http://www.property118.com/premium-tenancies/24130/
http://www.landlordlawblog.co.uk/2012/02/09/five-premium-tenancy-questions-answered/