Landlords – Don’t be a Victim of Changes to Tenancy Deposit Protection Legislation

Stack of £20 notes with a set of keys resting on top with a green key fob.

I have chosen to make this the subject of my first article in the series for two reasons namely, many Landlords are unaware of the changes to Tenancy Deposit legislation in the Localism Act 2012 which began in April this year and a serious issue has come to light only this week and it seems that many landlords are also unaware of it.

Protect Deposit

There were two big changes made to Deposit Protection legislation in April 2012

  1. The penalties for failure to comply with Deposit Protection legislation were changed. Where previously there was a standard penalty of the full deposit plus 3 times the amount Judges now have the discretion to award from 100% of the deposit and up to 3 times the amount. We expected that this discretion would mean that a minor failure, ie the deposit was protected a few days after the 30 days or some of the documents that should be provided to the tenant were not given, would result in 100% of the deposit being returned to the tenant regardless of damages or losses.  A recent case, Ayannuga v Swindells, November 2012, has shown that this is not the case and I have explained the details below.
  2. The deposit must now be protected within 30 days of taking it and all the information that the law requires must be given to the tenant within that time. Previously we had 14 days in which to protect the deposit and landlords were “getting away” with protecting the deposit after the tenant has begun legal action against them.

It is this second issue that is causing concern this week.

Two of the Tenancy deposit protection schemes continue to protect the deposit from the date that is it registered by the Landlord or Agent until the date that the tenancy comes to an end or a significant change is made to the original contract or a new AST is signed.

These two schemes are the DPS and MyDeposits.  One of the schemes ,the TDS, changed the rules of the scheme in January 2012 (this is allowed under legislation and Landlord and Agents must comply with the scheme rules).

The scheme now requires the Landlord or Agent to update the deposit record when a tenancy becomes a Statutory Periodic Tenancy, this arises when the fixed term comes to an end and the landlord and tenant do nothing.   All the terms and conditions of the original Agreement remain the same and the tenancy is said to “rollover”.  If the record is not updated the deposit protection will come to an end with this scheme on the last day of the fixed term. When the record is updated protection will continue and a new Protection Certificate will be produced and this, together with all the prescribed information, must be given to the tenant just as it was as the start of the Tenancy in order to comply with legislation.

This change is very significant because if the Landlord or Agent has not updated the record the deposit is not protected and the law has been broken.

If the Landlord or Agent has updated the record but has failed to give the Tenant the updated information the law has been broken. If the law has been broken on either of these two points there is a case to answer which could result in the full penalty of 400% of the deposit being due to the Tenant.
If you are in any doubt about your legal position on Deposit Protection please check the rules of the Protection Scheme that you are using.

If you have not protected a deposit or given the correct information to your tenant you could face very expensive litigation and you should take legal advice as soon as possible.

Good tenancy documentation such as an inventory can prevent disputes!

TickmarkWhile disputes about deposits happen at the end of the tenancy they are often “created” at the beginning.

Good documentation is vitally important and the most important document is the Inventory.

Some landlords choose to use an Inventory Clerk because they want an independent record of the condition of the property at the start and the end of the tenancy while other landlords prefer to do their own Inventory.

There are now some very good phone apps. that enable a landlord to carry out a professional Inventory recording the condition of the property and its contents in both photographs and text.  For those landlords who don’t use technology it is important to use a good property inventory template and to take photographs to support their text.

Everything that you want to cover should be recorded in this way and an accurate description of the condition is important.

I have seen Inventories that record the condition as “good” or “fair” and these are not useful descriptions if you are in dispute with a tenant.

When the item is new we need to record the date of purchase on the first Inventory and then carry this forward to future Inventories.  This will help us to calculate how much use we have had from the item and compare it with the manufacturers expected lifespan.  If we want to claim for an item that needs to be replaced we should calculate the percentage of the life of the item that we have been deprived of (how much longer it should have lasted) and apply that percentage to the cost of replacing the item on a like for like basis plus disposal of the original and delivery and fitting of the replacement. We cannot claim new for old and this is what causes many disputes, if the dispute goes to arbitration with the Deposit Protection Scheme that we have used the arbiter will expect to see the above calculation applied. If the item is not new we must make an accurate record of the condition “unmarked”, “as new”, “in perfect working order” are good descriptions but if there are marks or defects these should be recorded too.

Giving every item with the Manufacturers In Use and Safety Instructions (and listing this on the Inventory) makes it clear to the tenant that we expect the item to be used in accordance with these instructions. Our expectations are realistic because they are those of the manufacturer and I am always surprised when I see landlords writing out their own instructions for tenants. If you haven’t got the original manufacturer’s instructions most of them can be downloaded from their web sites.

It is important to note the exact location of each item because items, carpets and decorations are often damaged when items are moved from their original location and an item that is not where we left it can often give us the evidence we need to prove that damage was caused by the tenant.

Even where we offer a property unfurnished it is important to record the decorative order and condition of sockets, switches, windows, doors, sanitary wear, cupboards etc. to avoid a dispute at the end of the tenancy.
Each page of the Inventory should be signed by the tenant and each individual photograph if they are not embedded into the Inventory. This signature is evidence that the tenant agreed to the contents of the Inventory and without it you may struggle to introduce an Inventory as evidence

The importance of cleanliness at the start of a tenancy

Tenant InsuranceCleaning is the biggest cause of tenancy deposit disputes and it is therefore important to make an accurate record of the state of cleanliness of everything, supported by photographs and text.

If the property has been professionally cleaned at the start of the tenancy we need to keep a record of the Invoice and note that it was professionally cleaned on the Inventory. We have a right to request that the property is left to a professionally clean standard at the end of the tenancy but we have no right to expect that the tenants should pay for it to be professionally cleaned, that is for them to decide.

If tenants ask you to inspect the property before they move out it is important to make it clear, in writing, that this is only a preliminary inspection to help to avoid a dispute but that it cannot be inspected thoroughly until the tenant has removed all her/his belongings and is ready to move out or has left.

It is not uncommon for a tenant to withhold the last months rent if (s)he suspects that the deposit may be withheld. There is very little we can do to prevent this other than make it clear that we are always fair but this is a good reason why many of us take 6 weeks rent as a deposit rather than just an extra month. We should not take more than 1/6th of the annual rent as a deposit because to do so will be considered to be taking a Premium and may change the terms of the Tenancy enabling a tenant to sublet without our consent.

Landlord hit hard for not providing the right information to the tenant

It is very important to comply with Tenancy Deposit legislation to avoid a tenant making a claim for full recovery of the deposit, regardless of losses or damages, and up to three times the same amount in compensation.

In Ayannuga v Swindells, November 2012 the landlord was hit hard because he omitted to provide one piece of information despite having protected the deposit on time and with an approved scheme.

  •  Any money taken to protect the landlord against losses is a deposit regardless of what it is called
  • A deposit must be protected through one of 3 Government controlled schemes within 30 days of being taken from the tenant
  • The tenant, and any third party who provided the deposit, must be given the Deposit Protection Certificate and All of the Prescribed Information for Tenants with 30 days of the deposit being taken
  • The deposit or any undisputed amount must be returned to the tenant with 10 working days of the end of the tenancy

You will find more information here

When you decide that you will withhold monies from a tenants deposit you should show clearly what you have withheld and provide receipts or quotations to support your claim.

It is afterall their money and they have a right to know exactly why they are not getting it back. It is always better to try to reach agreement with the tenant about monies to be withheld from their deposit in order to avoid an official dispute being raised but if the tenant does ask the deposit protection scheme to arbitrate their decision will be final and there is no appeals process.

Disputing the deposit

If you are involved in a dispute send a simple reply bullet pointing the reasons that you have withheld each amount and stating the number of the supporting documents that you have included.  Put a number on each supporting document to match the number on the letter. Do not go into a long dialogue this wastes the Arbiters time and will not help your claim because they are looking for clear evidence that you have the right to make a claim from the tenants deposit.

The Tenancy Agreement and Inventory should be included in the documents and also rent records if there are arrears. Show that you have calculated the loss of the expected lifespan of the item rather than claiming new for old replacement.

If you are realistic in your expectations and have documentary evidence to prove your losses many disputes can be avoided. Some landlords will take the hit for certain losses and if you have done this it is important to list the loss and note that no charge was made, this shows that you are being more than fair.

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