Tenancy Deposits in the Localism Bill?

A brief note to highlight some unexpected amendments that have been tabled to the Localism Bill. The latest marshalled list includes new sections which are designed to make amendments to the Housing Act 2004 and specifically to the tenancy deposit protection provisions.

The changes dispose of the unclear concept of ‘initial requirements’ and remove the late protection loophole revealed by cases such as Draycott v Hannells and Tiensia v Univeresal Estates. They also remove the loophole utilised by some landlords of returning the deposit to the tenant and then asserting that s214(4) only requires that they pay the three times penalty if they have also been ordered to pay the deposit back. This will mean that tenants will find it far easier to pursue landlords or agents who have failed to protect their deposits and landlords will not be able to rush deposits into schemes after the 14 day period and thereby avoid penalties. The changes also clear up other areas of uncertainty, such as the status of multiple tenants, which have not yet come before the higher Courts.

From the landlords point of view the changes are an improvement because they do away with the fixed penalty of three times the deposit for failure to protect and, instead, create a variable penalty ranging from the value of the deposit up to three times the value of the deposit. In other words the tenant will get their deposit back or have it paid into the custodial scheme and will also receive a further sum of money equivalent to not less than the deposit and not more than three times the deposit. In considering the exact amount to award the Court will consider why the landlord did not protect the deposit, what the landlord knew or should have known about his obligations, and how quickly he resolved the situation. This will mean that ignorant landlords will still be penalised but they should be able to bring the size of the penalty down to a more manageable level.

It is by no means certain that the amendments will survive into the final version of the legislation but, given that CLG is rumoured to be consulting with its own lawyers on how best to deal with the problems thrown up by the various court cases, it is likely that the amendments will receive government backing in which case they will probably become law.

About D

D is a solicitor specialising in landlord and tenant matters with a London firm.
Posted in Assured Shorthold tenancy, Deposits, Housing law - All and tagged , , .

2 Comments

    • Unfortunately it looks as if the Government has dclined to give its backing to these amendments, and they will not be pressed to a division. Andrew Stunnel, the relevant Parliamentary Undersecretary had several problems with the proposals. Very briefly:

      1. That they did not deal with the problem that if a deposit cannot be protected after a certain period, it is arguable that a valid s. 21 notice can never be given. This was unacceptable to the Govenment;

      2. That the minimum starting point for the penalty of 1 x the deposit was too high and;

      3. That the ammendments went beyond the decision in the CA in so far as they sought to regulate the position when a new landlord comes into the reversion of a tenancy the deposit against which is unprotected.

      In the circumstances they were withdrawn and not put to a division.

      You can read the relevant committee report here: http://www.publications.parliament.uk/pa/cm201011/cmpublic/localism/110310/pm/110310s01.htm

      Somerset

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