On 26 March 2015, The Deregulation Act 2015 came into force making important changes to the rules regarding tenancy deposits with immediate effect and clarifying ambiguities created by recent case law. Landlords will need to act quickly to ensure tenancy deposits taken before 6 April 2007 in respect of assured shorthold tenancies are protected in certain circumstances. Laura Bushaway and Zoe Athill examine the changes.
Since 6 April 2007, it has been mandatory for landlords to protect a tenant’s deposit in respect of an assured shorthold tenancy (AST) in an approved tenancy deposit scheme and to provide certain prescribed information to the tenant within 30 days of receipt of the deposit. Failure to do so means that the landlord is unable to serve a valid Section 21 Notice to bring the tenancy to an end and exposes landlords to the risk of a financial penalty of up to 3 times the deposit.
The changes largely represent a codification of some recent Court decisions in order to remove any uncertainty which had been created.
What are the changes?
- Deposits taken on or after 6 April 2007 that were protected and for which prescribed information was served during the original fixed term of the tenancy
If the landlord took a deposit on or after 6 April 2007 which it placed in a tenancy deposit scheme and served the prescribed information during the original term of the tenancy then it will not be necessary for the landlord to re-protect the deposit when the fixed term ends and the tenancy becomes or became a statutory periodic tenancy – once will be enough. However, these provisions do not apply to a landlord who failed to protect the deposit during the original tenancy.
- Deposits taken before 6 April 2007 in respect of tenancies which became periodic before that date
Landlords are required to protect those deposits now, however, there will be no financial penalty for failure to do so. In order for landlords to serve a Section 21 Notice to terminate the tenancy, a landlord must either protect the deposit and serve the prescribed information now or return the deposit in full to the tenant.
Under The Deregulation Act, landlords have been given a period of 90 days from the date that the Act came into force to protect the deposit and provide the prescribed information to the tenant. Therefore, these steps must be taken by 23 June 2015. If so, the landlord will not be at risk and the tenancy deposit rules will have been complied with. If not, the landlord will be unable to serve a Section 21 Notice to terminate the tenancy (unless the deposit is returned to the tenant).
- Deposits taken before 6 April 2007 where the tenancy became a statutory periodic tenancy after that date
Where the landlord has never protected the deposit, the deposit must now be protected and the prescribed information served within the grace period provided in the Act of 23 June 2015. Failure to do so will leave landlords exposed to a claim for a financial penalty and unable to serve a Section 21 Notice without having first returned the deposit to the tenant.
- Prescribed information
It is now acceptable for agents’ details to be given in place of landlords’ details where the agent protected or is dealing with the deposit.
When will the changes apply?
The changes regarding tenancy deposit protection are now in force and effective immediately.
Landlords should act fast to take advantage of the window of opportunity given to them by reviewing their portfolios and protecting any tenancy deposits received before 6 April 2007 which have not yet been protected by no later than 23 June 2015.