Do I Need to Protect My Tenant’s Deposit Through a Tenancy Deposit Scheme?

May 13, 2021

Securing a small sum to cover dilapidations to a Property during a Tenancy has been standard practice for Landlords for as long as there have been Tenancies. Typically, this sum would simply be held by the Landlord or their Agent, to be returned to the Tenant on the condition that the Property was returned in acceptable condition. In the last 50 years, various legislation has been introduced surrounding the rights of Landlords and Tenants, and as of 2004 this now includes specific rules for handling a Deposit.

Section 213 of the Housing Act 2004 states that if you secure a Deposit from your Tenant at the commencement of a Tenancy, within 30 days you must:

1. Register the Deposit with an authorised scheme (such as The Deposit Protection Scheme);
2. Provide a copy of the Deposit Protection Certificate and Terms & Conditions (“the prescribed information”) to your Tenant.

These schemes can either register a sum held by the Landlord or Agent or can hold a sum on their behalf.

Many Landlords have questioned whether they need to register their Deposit, usually arguing that the terms in the average Tenancy Agreement already make provision for the return of the Deposit.

The short answer is yes. This legislation exists for the protection of all parties and there are expensive consequences for any Landlord who fails to follow the rules.

The primary aim of Deposit Protection Schemes is to provide a mediator in the event of a dispute between the Landlord and Tenant over the return of the Deposit. This offers a layer of protection for both parties in situations which could otherwise become contentious.

In the event that a Deposit is not protected and/or the prescribed information is not provided to a Tenant, Section 214 of the Act states that the Tenant can make an application to the Court, seeking:

1. Return of the Deposit in full, or an Order from the Court stating that the Deposit must be registered with an authorised scheme with immediate effect;
2. Statutory compensation for each breach of the Act, from one to three times the value of the Deposit.

For example, if a Deposit of £1,000.00 was not protected the Tenant could seek the return of the £1,000.00 Deposit plus up to £3,000.00 in compensation.

The compensation legislated in the Act is “statutory,” meaning that the Court must award some amount of compensation in the event that a breach is deemed to have occurred. It falls to the Court’s discretion as to how much compensation they wish to award and this is usually based on the seriousness of the breach.

In conclusion, the consequences of failing to appropriately protect a Deposit are simply not worth the risk, and it is recommended that Landlords follow this legislation to the letter without exception.

If you are a landlord or a tenant seeking further advice on the tenancy deposit scheme then please do not hesitate to contact Harriet Melvin by email at harriet.melvin@tayntons.co.uk or by telephone on 0800 158 4147.