News & Insights

Landlords not complying with tenancy deposit rules

A report published by The Centre for Economic and Business Research in January 2016 suggests that 15% of landlords aren’t protecting tenants’ deposits.  Mark Banham warns of the potential consequences.

The Centre for Economic and Business Research’s report “Protecting Generation Rent” makes an interesting, if not entirely surprising, read for those involved in the residential landlord and tenant sector – which given that about 1 in 6 households are renting from private landlords is a lot more of us than it used to be.

The report estimates that 15% of residential landlords are not complying with the very strict legal responsibilities to register deposits with one of the three authorised tenancy deposit schemes, and that between them this amounts to about half a billion pounds., who sponsored the report, are using this as part of a call for all residential landlords and rented properties to be subject to compulsory registration, a system that has recently been adopted in Wales and Scotland.

A landlord who receives a deposit has to register it within 30 days of receipt and give the tenant certain statutory information. This can be done on-line and is surprisingly quick and user-friendly. Despite that, it isn’t happening universally. Even professional agents and landlords can occasionally “miss one” due to administrative errors, and there are thousands of private individuals, usually letting out a single home that they have inherited or held onto over the years, who often still don’t know about the regulations. Anecdotal evidence suggests that the majority of the 15% of non-compliant landlords probably only have one or two properties each, while the “professional” landlords with more substantial portfolios are more likely to be compliant, and therefore the £500 million figure may well be an overestimate. Ignorance of the law is, of course, no excuse and neither is accident, forgetfulness or even getting it right late. The tenant has a right to sue the landlord in the County Court, and the Court has to order the landlord to return or protect the deposit and to pay a “fine” to the tenant of between 1 and 3 times the amount of the deposit. If the landlord has defaulted, the only question is how big that fine should be. Getting the deposit protected, even if it is late, will undoubtedly help persuade the Judge that the fine should be at the lower end of that range.

In addition, unless the deposit is protected the landlord cannot serve a valid notice under s.21 of the Housing Act 1988 terminating the Assured Shorthold Tenancy. Proof of protection is a requirement when requesting a possession order under a s.21 Notice, and this is often the moment when the problem comes to light – putting the landlord in a potentially very awkward position about how to get their property back.

The original registration rules were introduced in 2007 and we have been advising landlords and tenants in these situations ever since. If you find that there is a problem with a deposit, professional advice can help you resolve the issue properly and quickly. If you want to discuss these issues, contact me at [email protected], or by telephone on 0118 951 6243.