In 2007, the government introduced a compulsory deposit protection scheme as part of the Housing Act 2004 to help protect tenants from rogue landlords, and provide a more robust mechanism for mediating disputes at the end of tenancies.
When it was first introduced, it was unclear whether landlords with existing tenants who had moved in before 6 April 2007 would be affected.
Now, however, under section 32 of the Deregulation Act 2015, all deposits received before 6 April 2007 for tenancies that have since been renewed or become statutory periodic tenancies post 6 April 2007, must be protected under one of the government approved schemes - MyDeposits, the Deposit Protection Scheme or the Tenancy Deposit Scheme – before 23 June.
The change to the law is in response to the Superstrike vs Rodrigues case which involved a point of law regarding the proper treatment of a deposit paid prior to the 6th April 2007. Although the tenant had moved into the property in January 2007 – before the mandatory tenancy deposit protection had been introduced – the Judge ruled that at the end of the fixed term tenancy in January 2008 a new tenancy commenced on a statutory periodic basis.
Accordingly, the original deposit for the fixed term tenancy was deemed to have become a new deposit in respect of the new tenancy, even though no cash changed hands at that point. What is key is that the money remained unprotected and this went against the landlord in the ruling.
There is a lot of clear guidance on the government website about deposit protection schemes, as well as the individual deposit protection scheme websites. Some basic points landlords and agents need to be aware of are:
• Landlords or their letting agent must put your tenants deposit in an approved scheme within 30 days of receiving it
• Within this 30 day period, you need to give your tenants certain information, including where the deposit is protected
• Fines for failing to register the deposit in an approved scheme are uncapped and are calculated at three times the initial deposit
• At the end of the tenancy agreement, you must return the deposit within 10 days of agreeing the sum to be refunded
• If there is a dispute, the deposit will be protected in the deposit protection scheme until the dispute is settled
It’s important to remember that rules and regulations aren’t intended to catch landlords out – far from it; they’re designed to protect both landlords and their tenants and ensure the industry is operating in a fair and transparent way. If you do have any concerns or confusion over these recent changes though, seek professional advice as soon as possible. Remember – there is now just over a month to make sure all your landlords have protected their tenants' deposits.
*Rachel Haymes is head of conveyancing at Ratio Law