Tenancy deposit protection amendments proposed by the Localism Bill

At our ADR workshop in Leeds last week I was interested to learn that some of the attendees weren’t aware of the changes proposed by the Localism Bill that will affect tenancy deposit protection under the Housing Act 2004 (the Act). With that in mind I thought it would be useful to summarise them here:

30 days – not 14 – to protect deposits and issue Prescribed Information

Currently the Housing Act requires that landlords/letting agents protect a tenant’s deposit within 14 days from the day it is received – the Localism Bill has proposed that this be amended to 30 days. This will remove landlord’s/agents’ ability to rely on ‘administrative oversight’ for any delay in protection.

The requirement for providing the Prescribed Information to the tenant will also be changed to within 30 days of receipt of the deposit.

Closing the loophole

Following high profile court cases – like Universal Estates v Tiensia late last year – the Localism Bill has proposed a change that will close the loophole regarding the ‘initial requirements’.

Rather than it being mandatory to comply with the ‘initial requirements’ of a tenancy deposit scheme, the proposed change will give tenants the ability to approach a county court to enforce compliance by a landlord with its obligation to protect the deposit and supply the Prescribed Information – where this has not been done – within 30 days of receipt of the deposit.

Protection after the tenancy has ended

If a tenant makes an application to the county court once the tenancy has ended, the landlord will no longer be able to retrospectively protect the deposit in order to comply with the Act.

Currently the courts can order either the repayment of the deposit to the tenant, or the immediate protection of the deposit with a custodial scheme. A new proposed subsection to the Act will ensure that if the tenancy has ended, the only option is for the landlord to repay the deposit, or part thereof, to the tenant.

Revised sanctions for non protection

Currently, if a landlord is required to pay a fine to the tenant for failing to comply with the Act, then the judge has to award three times the amount of the deposit. Under the new proposals the Judge will have discretion to award not less than the amount of the deposit and not more than three times that amount.

Section 21 notices

Section 215 of the Housing Act will also be amended to provide clarity that a section 21 notice may not be given where a deposit has not been protected within the 30 day period under section 213(3) or (6), however this prohibition may be mitigated where:

  • the deposit has been returned to the tenant in full or with such deductions as have been agreed;
  • an application to the county court under section 214 has been made and has been determined by the court or withdrawn or settled between the parties.

The above changes are awaiting Royal Assent; if they’re passed they will come into force in April 2012. We’ll keep you updated on the progress of the Bill and if passed we’ll let you know of any enhancements we’ll implement to stay ahead of the changes.

To familiarise yourselves further with the proposed changes, have a look at the Localism Bill (section 171) and view the amendments against the Housing Act 2004 (sections 213 – 215 are relevant).