Tenancy deposit protection schemes will have more teeth, once changes are implemented next April, says a lawyer.
Olivia Tassell, a property lawyer at Boodle Hatfield, said that courts will be more likely to enforce the new regulations, which come under the Localism Act.
The changes to the Deposit Scheme regulations have been puzzling agents and landlords, as they appear to relax the requirements, giving 30 days to comply and allowing the courts discretion to award a penalty of between one and three times the deposit amount, should they fail to do so.
This is in contrast to the existing legislation which requires compliance within 14 days and contains a non-negotiable penalty of three times the deposit for non-compliance.
The Government’s aim behind these changes appears to encourage the courts to enforce the regulations by making their requirements fairer.
Tassell said: “The tenancy deposit scheme has been criticised by many for being too harsh on landlords.
“Recent case law shows that the courts have been reluctant to enforce the legislation, perhaps because the only penalty open to them was a fine equivalent to three times the deposit, irrespective of the severity of the breach.
“The courts have appeared to seek ways round the legislation, resulting in the regulations being taken less seriously by some landlords.
“Landlords will welcome the extension in time to comply with the scheme, and whilst the courts may be more willing to enforce the regulations, the penalties are likely to be less harsh.
“Furthermore, those landlords who have historically prided themselves on their compliance with the regulations will take comfort in the fact that they should now be enforced more rigorously across the board.”
We will keep you updated on the regulations and the changes. The likely implementation date is April 6.
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Comments
"The changes to the Deposit Scheme regulations have been puzzling agents and landlords, as they appear to relax the requirements, giving 30 days to comply and allowing the courts discretion to award a penalty of between one and three times the deposit amount, should they fail to do so.
This is in contrast to the existing legislation which requires compliance within 14 days and contains a non-negotiable penalty of three times the deposit for non-compliance."
Some important misunderstandings here I think.
First the Courts are likely to award whatever is appropriate in the circumstances rather than be inhibited by the x3 penalty. So my view is it will all even out but that x3 will be awarded where merited.
The really big issue here and which appears to have gone largely unnoticed is that the new penalties are retrospective. So any agent that has not handled the deposit correctly especially given the recent Suupere v Nice case (which is not nice!!) will be open to being pursued by the ex tenant for up to 6 years.
The ability for Landlords to avoid the penalties by registering late is removed by these new provisions - once the 30 days has elapsed there is absolutely no salvation. Hardly a relaxation in the regime don't you think?
The 30 days may appear generous and given that the deposit should frankly be protected as soon as handled - why not - will probably mean the penalties for not having done so within a more relaxed timeframe will be enforced more harshly.
We shall see once this becomes Law.
Better make sure those PIN forms are correct guys given the decision in Suupere
Like I said last week, 28 days is too long. How quick do agents pay themselves is what you need to ask. Bit like solicitors who clear the account down on the day of completion. Agents should do the same. I know I do as the money is no good in the client account. By not sending deposits off there is no gain in interest these days.