Tenancy Deposits

17 Jun 2010 | Shilpa Mathuradas

Are you a tenant who has entered into an assured shorthold tenancy agreement after the 6th of April 2007? If so, your Landlord is required by law to protect any deposit you are required to pay by paying the same into a tenancy deposit scheme. The tenancy deposit scheme must be what is referred to as an “authorised scheme”, which effectively means a scheme approved by the government.

This requirement was brought into law further to provisions of the Housing Act 2004 (“the Act”). The aim behind this law was to curb abuse by Landlords when returning deposits to Tenants at the end of a tenancy. Many Tenants had encountered problems at the end of their tenancy whereby Landlords would either refuse to return the deposit or would make significant deductions on what were often spurious grounds. Given the relatively small amounts of money it was rarely cost effective for Tenants to instruct solicitors to litigate against Landlords to recover their deposit. The result was that unscrupulous Landlords were effectively able to get away with ripping off their Tenants.

The new provisions of the Act remedy this problem. The Landlord is required to place the deposit in an authorised scheme administered by one of the three companies awarded contracts by the government to run these schemes. The Landlord is also required to provide various pieces of information to the Tenant regarding the authorised scheme. Should a dispute arise between the Landlord and Tenant at the end of the Tenancy the scheme provides a dispute resolution service, which is free of charge.

Perhaps the most important change brought in by the Act are the penalties which can be imposed upon Landlords for failure to comply with their obligations under the Act. Should a Landlord fail to comply with the requirements to place a deposit in an authorised scheme or fail to provide the relevant information to the Tenant the Tenant is then entitled to make an application to Court citing such failure on the part of the Landlord. Upon such an application if the Court is satisfied that the deposit is not held in an authorised scheme or that the relevant procedures under the Act have not been properly complied with, the Court must order the return of the deposit to the Tenant or order that the deposit be paid into an authorised scheme. In addition, the Court must order the Landlord to pay the Tenant a penalty of three times the amount of the deposit. Herein lies the financial incentive for compliance on the part of Landlords. It is perhaps unlikely that many Landlords would continue to fail to protect Tenant’s deposits if there is a risk that they may be ordered to pay damages of three times the amount of their Tenant’s deposit!

If your Landlord has failed to protect your tenancy deposit as required by law it is worth contacting solicitors to advise you on the possibility of bringing a claim. Solicitors in our Property Litigation Department have experience in this type of litigation and would be happy to discuss the merits of your case with you.

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