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Correcting tenancy deposit mistakes

Since the introduction of the Deregulation Act 2015 the process of registering and returning a tenancy deposit has been made simpler for most landlords. There are still some situations though where it is very complex and the Deregulation Act changes have actually made that worse.

In general, deposits should be protected within 30 days of receipt and the landlord should supply the tenant with any prescribed information within the same 30 days. Penalties will apply to those landlords that fail to register or supply the prescribed information within the 30 days.

Financial Penalties

For new tenancies, landlords that fail to register or supply the prescribed information within 30 days will be liable to pay the tenant between 1 and 3 times the deposit in addition to the return of the deposit itself. The claim for between 1 and 3 times the deposit can be made by the tenant for up to 6 years but it is unclear whether the 6 years begins from the date the deposit should have been registered or the end of the tenancy.

It is almost impossible to remedy the situation so that the landlord is no longer liable for the financial penalties where they have made a mistake. However, acting promptly to either return the deposit or attempt to register it is a factor the courts will consider when deciding what amount to award the tenant. Tenants and those acting on their behalf habitually claim for 3 times the deposit amount plus the return of the deposit in full. But in fact, very few courts will award the maximum penalty.

If a deposit was taken pre 6th April 2007 and the tenancy became periodic pre 6th April 2007 without any further fixed term being granted then landlords are not liable for any financial penalties where the deposit remains unregistered. However, where a landlord then wishes to serve a Section 21 for the periodic tenancy they will need to register the deposit and provide the prescribed information in the normal way for the notice to be valid. We appreciate this will be a fairly small number of tenancies but there are still some around.

Section 21

Any section 21 notice served during the period that the deposit is not registered, or the correct prescribed information is not provided is also invalid. A valid section 21 notice can only be served once the deposit has been returned to the tenant, deductions from the deposit agreed with the tenant, or the tenant has sued the landlord for failing to comply with the deposit rules.

Where the deposit has been registered but the landlord omits to serve the prescribed information the rules vary a little. A valid section 21 notice can be served once the prescribed information has been provided even where that is after the 30 days. If the prescribed information is served after the 30 days, then the tenant can still make a financial penalty claim for 1 and 3 times the deposit.

Mydeposits

It is also important to note that Mydeposits appears to make the provision of the Prescribed Information an initial requirement as defined in the Housing Act 2004. This means that where a landlord or agent have failed to provide the Prescribed Information within the time limit of 30 days they can only serve a valid Section 21 after they have returned the deposit to the tenant.

Comment

The process of when landlords or agents should have registered deposits and provided the prescribed information is still quite complex especially for those tenancies that commenced prior to the Deregulation Act.

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