Changes to the Tenancy Deposit Procedure - The Localism Act 2011

The Localism Act 2011 has introduced changes to the tenancy deposit procedure that all Landlords need to be aware of in respect of taking deposits from their tenants.

Under the old procedure, Landlords had a period of 14 days to protect a tenant deposit via an approved Tenancy Deposit Scheme and then provide the tenant with prescribed information as to where their deposit was being protected, how any disputes as to the return of the deposit would be resolved etc. If the Landlord failed to do either of these things, the tenant had the right to apply to the Court, requiring that the Landlord repay to them both the deposit and a penalty equal to three times the amount of the deposit.

However, the Landlord could avoid financial penalties by registering the deposit and then providing the tenant with the prescribed information at any time before a Court Hearing; or if the tenant made the application after the tenancy had ended.

This all changed on 6 April 2012.

The new procedure is as follows:

  1. Landlords now have a strict 30 days from taking the tenant deposit to both register it and provide the tenant with the prescribed information.
  2. If either of the above have not been completed within the 30 days, the tenant can apply to the Court for the return of the deposit and a financial penalty for the Landlord. The Landlord cannot escape liability by registering the deposit or providing the prescribed information after the expiry of this period.
  3. Tenants may now bring a claim as above even where the tenancy has ended.
  4. The financial penalty is no longer fixed at three times the value of the deposit. It is at a Judge discretion to award between one and three times the value of the deposit. This is in addition to a requirement for the Landlord to repay the deposit to the tenant.
  5. Landlords cannot serve a Section 21 Notice Requiring Possession if they have not complied with 1. above, even if they register the deposit out of time. This can only be facilitated if the Landlord repays all of the deposit to the tenant; if the tenant allows the Landlord to keep some of the deposit in respect of damage / unpaid rent; or the tenant has completed a claim for compensation for the Landlord failure to register the deposit or provide information.

A 30 day grace period was allowed until 6 May 2012, permitting Landlords one final opportunity to register their tenants deposits without further penalty. Now this has expired, any Assured Shorthold Tenancy in force as at 6 April 2012 is subject to the new rules they apply to tenancies where deposits were taken prior to 6 April 2012.

All Landlords should ensure that they comply with the requirements in relation to tenancy deposits there is now no defence for non-compliance.

If you are concerned that you have not complied with the tenancy deposit requirements, or are unsure as to your obligations in respect of taking deposits from new tenants, please contact the Emsleys Housing Law Team who will be happy to assist you.

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