Helen Matthews, Consultant at Bircham Dyson Bell LLP, explains the changes to the rules regarding tenancy deposit schemes ("TDSs") which took effect on 6 April 2012.
Landlords of residential properties let under assured shorthold tenancies ("ASTs") should be aware that as of 6 April 2012 there was a change in the rules relating to the penalties and obligations under the TDS.
The original intention of the TDS rules was for penalties for non-compliance to apply both where a landlord protected the deposit after the deadline set in the legislation, and where the deposit related to a tenancy which had since ended. Following a number of Court of Appeal decisions which cast doubt on the actual effect of the rules the government amended them to clarify and reinstate their original intention.
These are the changes made:
- The landlord now has 30 days instead of 14 days to protect the deposit in one of the government-approved schemes and to give the tenant the required information.
- If the landlord fails to protect the deposit within 30 days of the start of the AST the court has the discretion to award compensation for non compliance of between one (1) and three (3) times the deposit. The previous rule was that a blanket 3 times the deposit was the penalty for all non compliance issues. It remains the case that the landlord can also lose the right to obtain possession of the property on 2 months' notice, a right which normally applies to ASTs.
- The penalties will apply once the 30 day deadline has expired. The position previously was that the penalties did not bite if the landlord protected the deposit before the hearing of an application to court by the tenant seeking compensation for non-compliance.
- The penalties apply notwithstanding that the AST has come to an end.
- The changes are not retrospective. They apply to ASTs which were in existence on or after 6 April 2012.
- On 1 October 2010 the threshold for tenancies to come within the AST regime was increased from £25,000 per annum to £100,000 per annum. It is important to remember that deposits paid in respect of any tenancy granted before 1 October 2010 which became an AST as a result are now subject to the new TDS regime, even if that tenancy has not been renewed.
Landlords and managing agents should check their deposit procedures as soon as possible, if they have not already done so, and review any existing tenancies to ascertain whether they fall within the new TDS regime.