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Update On Registration Of Tenants’ Deposits For Residential Tenancies

Did you buy-to-let, are you a landlord of residential property, and have you registered your tenant’s deposit?

The Deregulation Act 2015 received the Royal Assent on 26 March 2015, and while some provisions are yet to come into force, some came into force immediately. One of the features of the Act covers the obligation on landlords of residential property to pay their tenants’ deposit into one of the government-backed tenancy deposit schemes (TDS). If you are a landlord who has not paid your tenant’s deposit into a TDS, you may be liable for a fine and could face real difficulty, and costs consequences, if you need to recover possession of your property.

All deposits paid under an Assured Shorthold Tenancy from April 2007 should have been paid into a TDS, and prescribed information given to the tenant. Many landlords are up to speed with these obligations, and the consequences, particularly those who renew leases regularly. However, there were exclusions, which the Deregulation Act has now changed. If you have had a tenant in place for years e.g. you bought to let, you have a second home or flat, you were left a property in a will with a sitting tenant etc. you may now have to act.

One provision of the Act provides that if you had a tenancy, with a deposit taken before April 2007 but not paid in to a TDS, and that tenancy continued on a periodic basis (i.e. the term expired but the tenant continued to pay rent periodically) the deposit must now be paid into a TDS and the prescribed information given. Under the Act there is a grace period to 23rd June 2015 to do so. If a landlord now does so, then the deposit will be treated as if it had always been protected. However, if a landlord does not they will fall foul of the legislation and will have to face the consequences.

Those consequences include having claims to recover possession struck out, potentially with costs consequences, having claims stayed until a deposit has been registered, and fines being imposed on landlords who have not complied – usually assessed as 3x the amount of the deposit.

For landlords who took a deposit before April 2007, and the lease became periodic before that date, you do not fall foul of the new legislation. However, the deposit must now be protected (or returned) before a landlord can take action to recover possession of their property.

Where a deposit was taken after April 2007 and placed into a TDS with the requisite information provided to the tenant, the Deregulation Act will treat a compliant landlord as having continued to comply on every lease renewal or whenever a statutory periodic tenancy arose in certain circumstances e.g. the deposit continues to be protected, and within the same TDS, the parties and property are the same etc.

So, the good news for a compliant and qualifying landlord is that you no longer need to keep re-registering the deposit and re-serving the prescribed information on renewal or when the term of a tenancy came to an end and became periodic – which under the much criticised case of Superstrike Ltd –v- Rodrigues was deemed to be a new tenancy.

Please contact Benjamin Lomer of Druces LLP’s Property Litigation team if you require further information with regard to this issue or:

• If you are in any doubt as to whether you should have or should now register a tenant’s deposit.

• If you are seeking to recover possession of your residential property;

• If you are a tenant and you know or suspect your landlord has not registered a deposit; or

• You have any queries concerning this area, which one of our clients recently described as a ‘dangerous legal minefield for residential landlords’

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