The Devil is in the Detail

The Localism Act 2011 is another heavy piece of legislation and you might be forgiven for missing a very important detail. It has been overlooked in several articles that I have read this week, but the courts will not forgive you so you’d better read on.

In the Housing Act 2004 it became unlawful to take a deposit from a tenant and not “protect” it through one of the 3 schemes that have Government contracts. The Housing Act 2004 included Tenants Deposit Protection (TDP) because it was perceived that landlords were not treating tenants fairly when it came to stoppages at the end of the tenancy and therefore the tenant needed to be given the opportunity to have independent arbitration in the case of a dispute. The arbitration must be paid for and the landlord was given two options.

1. Put the deposit into a custodial scheme where it is held, at no cost to the landlord or the tenant, until it is returned the end of the tenancy. The interest made on the monies lodged pays for arbitration

OR

1. Pay an insurance premium of £30 and hold the deposit yourself. The insurer will pay for the arbitration

I won’t go into the details of Tenancy Deposit Protection (TDP) but you can find them all here.

This had not been updated at the time of writing and the following statement at the top of that page is incorrect.

“There are currently no known outstanding effects for the Housing Act 2004, Section 212.”

The 2011 Localism Act, including changes made to this section of the Housing Act, can be found here.

These are the important changes made to the TDP legislation in this Act

1. We now have 30 days in which to protect the deposit from the date on which it is paid to us by the tenant – this is increased from 14 days
2. The legal penalties for not protecting a tenant’s deposit are now on a sliding scale, the minimum of which is the return of the full deposit (regardless of what a Tenant may owe you) up to a total of four times that amount. The court has the discretion to decide.
3. The tenant, and any other person who has provided the deposit, must be given the prescribed information and copy of the Deposit Protection Certificate within 30 days of paying the deposit – up from 14 days
4. If the deposit has not been protected within the first 30 days subsequent protection will not be legally compliant and a tenant may still take an action in the County Court, even after the tenancy has ended. The penalty may depend upon how long after the 30 days the deposit was protected.

The devil that is hidden in the detail is this

If you do not protect a tenant’s deposit within 30 days of taking it you will not be able to use Section 21 of the Housing Act 1988 to regain possession of your property at any time during the tenancy.

So say you want to remove a tenant from your property because you want to sell it (or for many other reasons) but the tenant is meeting all the terms of the tenancy and does not want to leave.

You did not protected the deposit within 30 days of taking it, so therefore-

You are stuffed

I have a couple of other warnings for you but I will let you digest that first.

*** Updated 7th December 2011 ***

This is the Link to the Localism Act Section 184 which relates to tenancy deposit protection

http://www.legislation.gov.uk/ukpga/2011/20/section/184/enacted

The details that I refer to are in

Sections 10, 11, 12, 13 and 2A

Given this situation what are the landlords option?

1. Do not take a deposit 

2. If you have missed the 30 day deadline you could give 100% of the deposit back to the tenant during the tenancy and this will enable you to serve a Section 21 notice if the tenant does not want to leave

3. You could try negociating with the tenant about any rent arrears, losses or damages and agree the amount to be stopped from their deposit and return the balance to them - during the tenancy - and then serve a Section 21 to remove them

4. You could try regaining possession using a Section 8 - with grounds - and hope that the court is not interested in the fact that you have not protected the tenants deposit within 30 days if this is used as part of a defence

YOU MIGHT TRY THIS 
Take a deposit and protect it under one of the three schemes within 30 days & give the prescribed information to the tenant within 30 days
 The date that these changes will take effect has not yet been announced but it looks likely to be April 2012

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