As a landlord in the UK, you have certain legal obligations when it comes to protecting your tenant’s deposit. Failure to comply with tenancy deposit protection rules can make it difficult to evict a tenant, even if they are in rent arrears or have breached the terms of their tenancy agreement.
In this blog post, we will look at what tenancy deposit protection is, why it was introduced, the implications of not protecting your tenant’s deposit, and how you can still serve notice and evict a tenant if their deposit is unprotected.
What is Tenancy Deposit Protection?
When a tenant rents a property under an Assured Shorthold Tenancy (AST), which is the most common type of tenancy agreement, the landlord is legally required to protect their security deposit in an authorised scheme. This requirement was introduced under the Housing Act 2004 in April 2007.
There are three tenancy deposit protection schemes in England and Wales:
- Deposit Protection Service (DPS)
- Tenancy Deposit Scheme (TDS)
These schemes hold the deposit for the term of the tenancy and help resolve any disputes over deductions at the end of the tenancy. Their aim is to ensure tenants get back the portion of the deposit they are entitled to.
When Did Tenancy Deposits Come In and Why?
Tenancy deposit protection was introduced to stop landlords unfairly withholding deposits at the end of a tenancy. Prior to the legislation, some landlords kept deposits they had no right to, leaving tenants unable to challenge unfair deductions. The schemes provide an independent arbitration process to resolve any disputes.
Why is it a Problem if Your Tenant’s Deposit is Unprotected?
If you fail to protect your tenant’s deposit, it can cause several issues:
- The tenant can take you to court demanding compensation.
- You may be unable to serve a Section 21 notice to regain possession, making it harder to evict the tenant.
- It shows you are an unprofessional landlord, breaching legal obligations.
Protecting your tenant’s deposit is a legal requirement, not an optional one. Failing to comply can put you on the wrong side of the law.
How Does Tenancy Deposit Protection Work for HMOs?
If your rental property is a House in Multiple Occupation (HMO), the rules work slightly differently. Each tenant in the HMO should have their deposit protected individually.
Some deposit protection schemes cater specifically for HMO landlords and will allow you to register multiple deposits under one account. You need to provide the prescribed information for each tenant though.
It can seem more complex than a regular AST. But fundamentally, you still need to protect each deposit within 14 days and provide the tenant with details of where their deposit is held. Follow the requirements and there should be no issues.
What Can My Tenant Claim if I Fail to Protect Their Deposit?
A tenant can make a claim against you in the county court if you fail to meet your legal obligations regarding their deposit protection. There are two key ways a tenant can claim compensation:
1. Up to 3 x deposit amount
If you have not protected their deposit or not provided the prescribed information within 30 days of receiving the deposit, they can claim between 1 and 3 times the deposit amount. The court will decide the amount based on whether your failure to comply was deliberate or not.
2. Up to 1 x deposit amount
If you protected their deposit late outside the 14-day window, the tenant could claim up to 1 times the deposit amount as compensation.
In both cases, the court also has the power to order you to either protect the deposit or repay it to the tenant. Do not take your deposit protection duties lightly – make sure you fully comply.
How Can I Make Sure I Comply with Tenancy Deposit Legislation?
Follow these tips to remain compliant with deposit protection rules:
- Protect the deposit within 14 calendar days of receiving it
- For new tenancies, provide the tenant with the prescribed information within 30 days of receiving the deposit. This includes scheme details and information on the purpose of the deposit.
- At tenancy renewal, check if the deposit is still protected and provide any updated details.
- If switching schemes, follow proper process – deposits must remain protected throughout.
- For a property with multiple tenants, protect each deposit individually.
- Keep proper records of deposit payments, prescribed information provided, and details of the protection scheme used.
How Do Deposits Impact Section 21 Evictions?
If you are looking to evict a tenant under a Section 21 ‘no fault’ possession notice, any failure to protect their deposit or provide prescribed information can invalidate the notice.
To serve a valid Section 21, you must fully comply with the deposit protection requirements. If the deposit is unprotected, you cannot use Section 21 – even if the tenant is in rent arrears. This means that if you know the tenant’s deposit is currently unprotected, you should enter it into a scheme before attempting to serve a Section 21 eviction.
You must also provide the tenant with the prescribed information before serving a Section 21 notice. If you don’t comply, your notice may be invalid.
An alternative route is to attempt to give the deposit back to the tenant before beginning eviction proceedings. However, if they refuse to accept it, you may find yourself still in a stalemate.
Can I Issue a Section 8 Eviction if My Tenant’s Deposit is Not Protected?
A Section 8 eviction notice can still be valid if a tenant’s deposit is not protected. Section 8 allows you to seek possession on discretionary grounds, like rent arrears or a tenant breaking terms of their tenancy.
While an unprotected deposit prevents the use of a Section 21 no fault eviction, it does not invalidate a Section 8 notice provided the grounds for possession are evidenced properly.
However, even with a valid Section 8 notice, your failure to protect the tenant’s deposit can still come back to haunt you. If you end up in court over the Section 8 notice, the judge may take your deposit protection failure into consideration and dismiss your claim for possession.
How Does Upcoming Legislation Affect my Ability to Evict Tenants with an Unprotected Deposit?
It’s expected that with the upcoming renters reform bill, Section 21 evictions will be outlawed and Assured Shorthold Tenancies will all transition to periodic tenancies.
This means that, once the whitepaper comes into effect, the laws around Section 8 evictions and deposit protection will be more relevant to landlords than the restrictions on Section 21 evictions.
Tenancy deposit protection rules exist to protect tenant’s interests. Failing to comply can seriously hinder your eviction options. Make sure you fully understand and follow the requirements around deposit protection and prescribed information.
Protect deposits on time, provide proper details to tenants, and keep clear records. If in doubt, seek professional advice. Ensuring you stay on the right side of the law puts you in a better position if you ever need to evict a tenant.
Able Investigations provide legally watertight tenant eviction services should they become necessary. Get in touch today to discuss how our fully trained investigation and enforcement team may be able to help.