Changes to Tenancy Deposit Rules

July 22, 2013

Changes to Tenancy Deposit Rules

Landlords and tenants should be aware of changes to the law relating to tenancy deposits paid under shorthold tenancies. These came into effect on 6 April 2012.

Previously, measures introduced in April 2007 under the Housing Act 2004 meant that any shorthold tenancy deposit had to be paid by the landlord into one of three Government-approved deposit holding schemes within 14 days of receipt of the deposit and the landlord had to provide the tenant with certain prescribed information regarding the deposit within the same time period. The legislation was introduced to give tenants additional rights in such situations and to try to reduce the incidence of disputes over tenancy deposits.

If the landlord failed to comply with the provisions, the tenant could apply to the court, which had the power to order the landlord to repay the tenant the deposit plus a penalty of three times that amount. In addition, the landlord was prevented from seeking possession of the property by notice without some breach of the tenancy provisions by the tenant.

Over the years, cases have come before the courts that have to some extent diluted the reach of the original legislation. For example, it was decided in a 2010 case that if the landlord complied with the provisions after the tenant commenced court proceedings, no penalty payment would be ordered. Last year, it was also held that a penalty could not be imposed once the tenancy had ended.

The new rules, introduced by the Localism Act 2011, make the following changes:

  • The landlord now has 30 days (rather than 14) from receipt of the deposit to comply with the rules and give the tenant the prescribed information;
  • If the landlord does not comply, the tenant can apply for a court order, which can be made notwithstanding compliance by the landlord in the interim;
  • The penalty payment is now set at a minimum of the amount of the deposit and a maximum of three times the deposit as decided by the court;
  • It is explicitly provided that the tenant can apply to the court even if the tenancy has ended; and
  • The landlord can determine the tenancy by notice in accordance with the usual rules once the deposit has been returned to the tenant, or the court has made an order or the matter has been otherwise settled.

Landlords should ensure that they comply with the amended regulations.