Rental Deposits Law

1. The Housing Act 2004
The Housing Act 2004 introduced major changes to the way local housing authorities enforce standards with respect to residential housing. This included a system of housing inspection which focuses on the health and safety of the occupant. Additionally, it introduced mandatory licensing for certain Houses in Multiple Occupation (HMO), Home Information Packs and provides new powers to deal with poor management of properties by landlords and empty dwellings. An important change included the introduction of the ‘Tenancy Deposit Scheme.’

2. The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 Section 213(5) of the Housing Act 2004
Under section 213(5) of the Housing Act 2004, the landlord must ‘protect’ the tenant’s deposit under the ‘Tenancy Deposit Scheme’. The Tenancy Deposit Scheme (TDS) came into force for all new shorthold tenancies created on or after the 6th April 2007. It is important that Landlords and Tenants are aware of the implications.

How it works:
The deposit is paid to the landlord or letting agent as usual, and it is the landlord or agent who must organise for the deposit to be ‘protected.’ The landlord must inform the tenant within 30 days (this used to be 14 days but has changed since the implementation of the Localism Act 2011) of taking the deposit, how it has been protected. Tenants can get all or part of their deposit back if they have kept the property in good condition and meet the requirements for the return of the deposit.

Deposit Protection Schemes
These schemes are free to use. The landlord simply pays the money into the scheme until the end of the tenancy.  The landlord must also give the tenant certain (‘prescribed’) information about how the deposit has been protected. The information they must provide is contained in the Housing (Tenancy Deposits) (Prescribed Information) Order 2007 and is summarised as follows:

(a) the name, address, telephone number, e-mail address and any fax number of the scheme administrator
(b) any information contained in a leaflet supplied by the scheme administrator to the landlord
(c) the procedures that apply under the scheme relating to how the deposit is repaid at the end of the tenancy
(d) the procedures that apply under the scheme where either the landlord or the tenant is not contactable at the end of the tenancy
(e) the procedures that apply under the scheme where the landlord and the tenant dispute the amount of deposit to be repaid at the end of the tenancy
(f) the facilities available under the scheme for enabling a dispute relating to the deposit to be resolved without recourse to litigation and
(g) the following information:
(i) the amount of the deposit paid
(ii) the address of the property to which the tenancy relates
(iii) the name, address, telephone number, and any e-mail address or fax number of the landlord
(iv) the name, address, telephone number, and any e-mail address or fax number of the tenant
(v) the name, address, telephone number and any e-mail address or fax number of any relevant person
(vi) the circumstances when all or part of the deposit may be kept by the landlord (which must refer to specific circumstances in the tenancy agreement)
(vii) confirmation (in the form of a certificate signed by the landlord) that
(aa) the information he provides is accurate to the best of his knowledge and belief and
(bb) he has given the tenant the opportunity to sign a document containing the above (prescribed) information

3. Who is a Relevant Person under the Act?
A relevant person is someone who paid the deposit on behalf of the tenant, with their agreement.

4. Is Rent in Advance a Deposit?
If money is given to the landlord to pay for rent for future months (for example in the absence of a credit check) then this is not a deposit that is protected under the scheme. (see Johnson v Old).

5. What is the definition of a Deposit?
A deposit is a sum of money which acts as a guarantee against:

• damage the tenant may do to the property
• cleaning bills if the property is left in poor condition
• bills that are left unpaid, for example fuel or telephone bills
• unpaid rent.

A ‘deposit’ is defined in section 213(8) of the Housing Act 2004 as “a transfer of property 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.”

6. The penalties

If the landlord fails to protect the deposit under the scheme or fails to provide the prescribed information within 30 days, the tenant is entitled to claim the full sum of the deposit back from the landlord. In addition, the landlord will pay a penalty of between one to three times the value of the deposit (the amount is decided by the court.)

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