Here is more on the ‘when is a deposit a deposit’ debate, courtesy of Eric Walker, managing director of Bushells in London.
Apropos of the changes to deposits which kick in on April 6, the Localism Act 2011 has this to say about deposits: “… in subsection (3) (landlord’s requirement to comply with initial requirements within 14 days of receipt of deposit) for ‘14’ substitute ’30’.”
“But when is a deposit a deposit? Many agents I know are confused,” says Walker.
He says that one agent advised a landlord that if the deposit was received a few days before the tenancy is executed, there is no tenancy and “monies are simply held to order until the tenancy is executed … if a tenancy hasn’t actually started, the funds are just money, and not a deposit until connected to the tenancy for which they provide security”.
Walker says this interpretation is wrong: “I have read the Act and confirmed with the TDS: they say the deposit must be registered with 30 days of it being received by the agent, regardless of whether a tenancy has been executed or not, UNLESS it is deemed a holding deposit.
“So, if an agent received the monies intended as a security deposit 29 days before the commencement of the tenancy and the landlord is dealing with the deposit registration under their own scheme, the monies must be paid over before the tenancy commences or the landlord won’t have time to register it.”