We continue to receive many enquiries relating to deposits and the effect of changes brought in by the Localism Act.
It seems clear that the Courts are aware of the requirements generally and certainly the experience we have is that Judges are alive to the issues and are considering them. The up to date Accelerated Possession Claim form requires information about any deposit taken to be included and also for the Claimant who is the landlord to confirm compliance with the rules of the relevant scheme including the giving of prescribed information and compliance with any other conditions such as the requirement to serve the Terms and Conditions of DPS on a prospective tenant. This means that any solicitor instructed must ask questions with regards to the above and satisfy themselves that there has been compliance before they can sign a statement of truth and commence proceedings in the County Court. Without such compliance any section 21 notice served will be invalid and proceedings would be dismissed.
It is therefore important that all agents and landlords regularly audit their portfolios to ensure compliance and perhaps more importantly ensure that they have systems ion place to be able to demonstrate that compliance has taken place meaning that all prescribed information has been served and the deposit protected within thirty days of the tenancy commencing or the deposit being taken whichever is the earlier. As we have blogged about previously the consequences of not being able to demonstrate compliance may make obtaining possession under the no fault section 21 ground difficult and leave both agent and landlord open to claims for a penalty from the tenant under the Housing Act 2004.
With regards to penalties as yet there seems little guidance regarding the factors the Court will take into account. As a result it is vital that if a landlord or agent becomes aware they have not complied they should urgently consider what action should be taken. In general terms they can either try and remedy any breach (e.g. by serving prescribed information out of time); an/or return the whole of the deposit to the tenant. It is not believed that this will prevent a claim but it may stand as good mitigation if a claim is made by any tenant. Agents in particular should be able to show why a lapse occurred and what steps they have taken to prevent this happening again. The impression seems to be that Courts will look favourably on those who are open and straightforward and save the harshest penalties for those deliberately flouting the rules and then prevaricating when claims are made. A documented system and protocol for dealing with deposits may be useful evidence. It seems likely that professional indemnity insurers will become alive to these issues and may impose their own requirements upon agents whom they offer cover.
It is worth remembering that certain aspects of the pre- Localism Act case law still applies. Certainly it is believed that where there is a joint and several tenancy agreement any claim will need to be made by all the named tenants. It may be that other aspects as time goes by will be upheld. The difficulty currently for advisers is that we have little guidance and so the advice offered must err on the side of caution.
No doubt over the coming months more cases will be reported and certainly as and when we become aware of them we will post further articles on this topic but if any of our readers have any experiences we would really like to hear them.