Residential Tenancy Deposits - Sledgehammer Legislation Repealed

Residential landlords will be relieved to learn that, with effect from 6th April 2012, the sanctions for non-compliance with the rules relating to tenants' deposits taken in connection with assured shorthold tenancies are finally relaxed.

Under the original rules, which were enacted in the Housing Act 2004 and came into force in April 2007, any deposit taken from a tenant in connection with assured shorthold tenancy must be dealt with in accordance with an authorised Tenant Deposit Scheme (a TDS). The sanctions for non-compliance with the rules were fairly Draconian:

. If a landlord failed to comply with the rules he was barred from serving a two-month notice terminating the tenancy.
. In addition to ordering the landlord to either repay the deposit to the tenant or pay it into a TDS, the court was required to order the landlord to pay to the tenant a sum equal to three times the deposit. The court was allowed no discretion in the matter. This provision generated considerable litigation with the courts indulging in a certain amount of mental gymnastics in an attempt to mitigate the harshness of the rule.

Under the new rules:
. The time-limits within which landlords must comply with the requirements of the rules are increased from 14 to 30 days.
. It is made clear that a landlord will no longer be barred from serving a two-month termination notice if:
. The deposit has been repaid to the tenant in full or with such deductions as the parties have agreed; or
. Court proceedings have been determined by the court, withdrawn or settled by agreement between the parties.
. Most importantly, the courts are given a degree of flexibility as to the financial penalty imposed on a landlord in breach. This will be a sum not less than the deposit but not more than three times the deposit.

To find out more, please contact Martin Banham-Hall or Caroline Wilton.

Filed: 04/04/2012 11:11:08