Articles | Tenancy deposits – some important changes

Simon Roberts considers a number of important changes to the tenancy deposit rules.  Landlords may welcome some of the changes but in some situations they will now have to act very quickly.

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Simon Roberts

Simon Roberts

The Deregulation Act 2015 is an unfortunate name for a piece of legislation that brings in so many new regulations.  There is much in the new legislation that will focus the minds of letting agents and this article looks at the new provisions relating to tenancy deposits.  The general idea behind the legislation is to reduce the regulatory burden borne by businesses, organisations and individuals across a wide range of sectors.  It is certainly the case that the changes will make it simpler for landlords to protect tenancy deposits.  A number of court cases since the tenancy deposit rules were introduced in 2007 have exposed serious flaws in the original provisions and the correction of these problems is to be welcomed.

How is the tenancy deposit scheme changed under the new Act?  We look at various changes below and the important thing to realise is that these new provisions are already in force – the new law came into effect on 26th March 2015.

1.  Pre-6 April 2007 tenancies

This is an area where landlords might have to take swift action if they are to avoid fines and difficulty in obtaining possession of the property.  If a deposit was taken before 6th April 2007 for a fixed term tenancy which then became periodic after that date, the landlord (if he has not already complied with the tenancy deposit scheme) now has until 23rd June 2015 to put the deposit into an official scheme and give the required information to the tenant.  If this is done it will be as if the deposit had always been protected and the prescribed information given.  If this is not done, the court could order the landlord to pay the deposit back to the tenant and impose a fine of up to three times the amount of the deposit.

2.  Deposits taken after 6th April 2007

In this situation most landlords will be aware of their legal obligation to protect deposits in one of the statutory schemes.  The difficulty that has arisen in the last couple of years is that the courts have interpreted the tenancy deposit rules as requiring the prescribed information to be given to the tenant on every renewal of the tenancy and on it becoming a statutory periodic tenancy.  This paper-generation process was particularly unwelcome to landlords and letting agents and could hardly be regarded as being helpful to tenants.  Under the new legislation, for landlords who have taken deposits after 6th April, provided they protected the deposit and gave the prescribed information at some stage during the initial tenancy, then it will be as if they had done so on each renewal or on the tenancy becoming a statutory periodic tenancy.  This is obviously helpful to landlords although the new rules will only apply where the renewal tenancy is a genuine “replacement” of the earlier tenancy (that is to say, the premises let under both tenancies are substantially the same and the landlord and tenant immediately before the earlier tenancy ended are the same as the landlord and tenant under the renewal tenancy).

3.  Agent’s address can now be given

The new rules have made a small change to the prescribed information to make clear that an agent’s details can be given in place of the landlord’s where the agent is dealing with the deposit.  This deals with an area of uncertainty that had caused some concern.

4.  No section 21 notice unless deposit protected

The new rules make it absolutely clear that any deposit taken for an assured shorthold tenancy (whenever the deposit was taken and whenever the tenancy started) will have to be protected otherwise no section 21 notice can be served.  Let there be no doubt here – all deposits for assured shorthold tenancies need to be in a protection scheme as from 26th March 2015.