Landlord and Tenant Law - Landlords Obligations To Protect The Tenant's Deposit
Residential letting is an area of law which has a huge amount of legislation aimed at protecting prospective tenants from mistreatment. If you are a landlord it is important to be aware of your legal responsibilities and one area where failure to comply with the law can result in heavy financial penalties is the arrangements relating to rent or damage deposits which landlords take.
Protecting the deposit
Throughout the 1980s and 1990s many landlords withheld tenants' deposits on ridiculous grounds was happening everywhere and because of this the government enacted legislation to protect tenant's deposits in the case of certain types of residential tenancy.
The legislation applies to assured short-hold tenancies, and states that any residential tenancy is presumed to be an assured short-hold tenancy unless the tenancy agreement specifically states otherwise. Under schedule 10 and sections 212 and 213 of the Housing Act 2004, Landlords are required to pay tenancy deposits into one of several government approved and regulated deposit schemes. At the end of the tenancy, the deposit will be held by the scheme until the landlord and tenant agree any deductions, or a court orders the deposit to be paid to either side.
Consequences of failing to protect a deposit.
If landlords fail to pay a deposit into a government approved scheme, then the tenant is entitled to claim compensation from them. The Act sets the level of compensation at three times the value of the deposit. In many cases the deposit will be between one and three month's rent and so a breach could result in the landlord being required to make a substantial payout. The requirement to protect the deposit has two unusual features:
Liability is strict so that there is no requirement for the tenant to show that the landlord is at fault of has acted in any way negligently or recklessly. If a landlord fails to protect a deposit as a result of an innocent mistake or oversight then he will still be liable to pay compensation to the tenant.
The breach is actionable per se, which means that the tenant is entitled to compensation regardless of whether or not they have actually suffered any loss or damage as a result of the landlord's breach. Because of this, it is in the landlord's best interests to make sure that care is taken to comply with the legislation as even a technical breach can result in compensation being payable.
Advising the tenant of the deposit protection scheme
Under the Housing Act the landlord must provide his tenants with written confirmation that the deposit has been paid into an approved deposit protection scheme and providing details of the scheme. This information must be supplied to the tenant within 14 days of the tenancy commencing.
Under the act a failure to provide the tenant with details of how the deposit is protected is considered to be just as culpable as a total failure to protect the deposit. If the landlord doesn't provide the tenant with information on the deposit protection scheme as required, the tenant will be entitled to compensation.
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