It is vital that landlords take appropriate action and protect their tenancy deposits when issuing an Assured Shorthold Tenancy (AST).
Landlords Must Safeguard Tenancy Deposits
In a recent case, a landlord who served a section 21 notice, to gain possession of the property, was told that this was invalid, as they had not held the tenant’s deposit in an authorised scheme.
Cases similar to this indicate to landlords and letting agents the importance of staying aware of changes in legislation that could affect them and their tenants.
Landlords and letting agents must protect the deposit, or they could risk having to return the tenants’ deposit before being able to serve a section 21 notice.
It is now illegal for a deposit to be held, unless it is in an authorised scheme. The deposit must be registered in one of three schemes: the Deposit Protection Service, mydeposits, and the Tenancy Deposit Scheme.
For landlords and agents who may not be aware of any legal implications, the result of not protecting a deposit could lead to them not being able to evict tenants until they have returned the deposit. Even then, they could face a damages claim.
Tenants can claim for three times the amount of the original deposit, and this would have a massive impact on a landlord’s finances. Landlords may think that if a deposit was paid before the 6th April 2007 enforcement date, they are exempt from the regulations.
Jobs and income are both still vulnerable, and long-term, reliable tenants can still suffer monetary issues and be unable to pay their rent on time. This could leave landlords who have not protected the deposit in a difficult position.
Landlords should keep a positive relationship with their tenants, and have a reputable law firm at hand, who can minimise risk, keep landlord’s aware of changes in legislation, and make changes in an effective manner.