Government tightens up rules protecting shorthold tenants’ deposits
New law makes it even more important for landlords to pay shorthold tenants’ deposits into a relevant scheme within 30 days of receiving them, or risk financial and other penalties.
Courts in the past have decided said that the statutory requirement that a landlord in a shorthold tenancy must pay a tenant’s deposit into one of three approved schemes, or risk paying the tenant a penalty of up to three times the amount of the deposit, only applies if:
- the tenant claims the deposit back before the end of the tenancy; and
- the deposit remains unpaid at the date of the actual court hearing.
Both of these decisions went against the spirit of the rules for protecting tenants’ deposits, so the government has now passed laws to reverse them. These came into force on 6 April 2012.
The new law makes it clear that a shorthold tenant’s deposit must be deposited in an approved scheme within 30 days of receipt by the landlord. If it is not, the tenant can immediately go to court to claim the deposit back, or to require that it be deposited. In either case the court can apply a penalty for non-compliance.
If the tenant does not go to court immediately, the landlord is still in default and remains liable to a claim for non-compliance at a later date.
For shorthold tenancies already in existence on 6 April 2012, landlords who have previously failed to pay a deposit into a scheme in accordance with the rules have 30 days to do so.
Landlords should ensure they comply with the new rules in relation to new shorthold tenancies they grant on or after 6 April 2012, and that they pay any outstanding deposits held by them in relation to pre-existing tenancies into a scheme within 30 days.
Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.
This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.