Since 6 April 2007 landlords must protect any deposit obtained from a tenant when entering into an assured shorthold agreement (AST) for residential properties. The legislation was introduced to safeguard the interests of both the tenant and the landlord by ensuring deposits are suitably protected.
Failure comply means that landlords are unable to serve a section 21 notice (which is usually relied upon to regain possession of the property upon expiry of the fixed term) making it more difficult to regain possession of a property. In addition to this, a landlord may face financial penalties for failing to comply with its obligations which could amount to between one to three times the amount of the deposit if the tenant issues a claim at court.
A recent case in the Court of Appeal has held that a landlord was not required to pay a rent deposit into a scheme, where there was no authorised scheme at the time the deposit was received. However, the landlord could only make use of the procedure in section 21 of the Housing Act 1988 to end the AST if the deposit was returned to the tenant, or possibly if it had been protected in an authorised scheme at the time the notice was served on the tenant seeking repossession of the property.
This decision will reassure landlords that are still holding deposits that have been received before 6 April 2007 as the Court found that there is no obligation to register those deposits unless they seek to rely on a section 21 notice.
If you are a landlord requiring advice on entering into an Assured Shorthold Tenancy agreement with a tenant, advice on protecting deposits or regaining possession of a property, contact Farleys Solicitors Property Litigation department on 0845 050 1958, alternatively please complete the online application form.