The Devil is in the Detail

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11:59 AM, 5th December 2011, About 13 years ago 107

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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.

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

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

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
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.
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
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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Tags: Deposit Protection, Landlords, Letting property, NLA, Private Landlords, Property management, rent arrears, Tenancy, Tenant eviction

Comments

8:35 AM, 14th December 2011, About 13 years ago

Yes fair point about the Sally Army.
I note you are considering a Good Landlord scheme which may address some of the issues I mentioned.
Perhaps for hosting that info you would request per landlord a contribution of which you would advise is the appropriate amount; say £10.00 to go not to you but to the Sally Army.
You could have some liaison with them regarding your Good Landlord Listings.
Potentially with a banner advert from the Sally Army you could get your listing utilised by ARLA, local councils etc, etc, etc.
This as you have stated you do not wish to take fees or charge for any services but mange via commissions.
To have as you previously suggested the Sally Army linked with a Good Landlord scheme should surely be good PR for all associated organisations.
Just a thought.

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Mark Alexander - Founder of Property118

8:52 AM, 14th December 2011, About 13 years ago

Hi Paul

Very thoughtful suggestions, thank you.

Just to correct you on one minor point though. We are not interested in commission, just advertising deals and sponsorships. We feel that commissions could compromise the integrity of Property118.com as we would then be incentivised to push products we don't necessarily beleive in in order to make more money. I suppose the same could be said about adverts but I think people are more accustomed to seeing them and realise they are not personal recommendations.

Regards

Mark

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11:25 AM, 14th December 2011, About 13 years ago

Let me get it right....Although I have signed a second 12 months tenancy and in this tenancy it requires I give three months. This is against the law and I am in order to give one months notice???

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Mark Alexander - Founder of Property118

11:27 AM, 14th December 2011, About 13 years ago

No! You are legally obliged to continue to pay the rent until the end of the agreement.

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Mary Latham

12:54 PM, 27th December 2011, About 13 years ago

This has been my most widely read article and I would like to thank Property 118 for allowing me to warn landlords to cover their backs. I will continue to keep my eye on the ball during 2012 because it promises to be a challenging year for landlords in the PRS. We must survive because without private landlords there will be more homeless people and society will simply implode. Love us or hate us national and local government must find ways to work with us

Don't loose heart there are usually solutions to be found but its important that we all keep up to date with everything that might have an impact on our ability to thrive and Property 118 is fast becoming the best place to find all the latest information and opinion. I really enjoy the discussions on this site and I have learned so much from those who post here - thank you

Always remember they cannot clone land

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22:46 PM, 28th December 2011, About 13 years ago

Paul ... is it not the case that any interest earned on deposit monies belongs to the tenant?

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14:31 PM, 29th December 2011, About 13 years ago

Jon The interest only belongs to the tenant if the Tenancy Agreement does not state that the landlord will retain the interest. Tenancy Deposit legislation does not allow the landlord to pass the cost of the protection premium onto the tenant and many landlords use the interest to off set some of that cost.

Some landlords do not hold the deposit and therefore they do not gain any interest on the monies, The deposit protection scheme that is free to landlords and tenants is the custodial scheme and they use the interest on the monies held to pay for the running of the scheme and arbitration service. They have needed a huge injection of public funds to keep the scheme going while interest rates have been so low. In my opinion it is wrong to use public funds to protect tenants deposits it is far fairer for landlords to use the interest on the monies that they hold to help cover the cost of the insured schemes.

Interest on the average deposit held for the average tenancy of 6 months does not cover the cost of £30 but it does help and the landlord makes up the shortfall.

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16:55 PM, 29th December 2011, About 13 years ago

We need more protection for landlords when tenants trash the place!
This is abominable legislation.

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21:20 PM, 29th December 2011, About 13 years ago

Toplets what changes to legislation do you suggest? I agree that if a tenant causes major damage the landlord should have some redress but many tenants have no assets and therefore I can only think of punishment which may act as a deterant for some bad tenants but for those who do damage regardless the landlord would still be no better off? Have you got something in mind that would compensate a landlord in this situation?

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19:50 PM, 30th December 2011, About 13 years ago

Again I have learnt somthing new form you Mary.
What about the situation where a tenant wants to add someone to an AST.
A DPC has to be issued.
Surely if I give permission I am perfectly within my rights to request that the tenants/s pay the fee for reprotection.
Also if a tenant wants another 6 month AST rather than proceed onto a SPT; surely I could say yes but the tenant has to pay the fee.
I don't charge anything for a new AST.
I self manage and don't charge tenants anything.
I don't think my AST states anything about my retaining interest on the deposit monmies I retain.
My AST is going to have so many appendicies the way things are going!!
Have you got a suggested AST with all the wrinkles you have mentioned which maybe we could use for free!!!?
If I am being cheeky, my apologies, if you don't ask you don't get!!

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