failure to protect tenants deposit

[kanrent]

Hi can anyone advise me

I issued my tenant with a AST on the 30th march 2007 for 11 months and did not protect his deposit, he now remains in the property on a periodic tenancy, i do NOT want to evict him, and as yet no problems everything is going fine between us. In view of the court ruling by lord justice Lloyd on the 14 june 2013 i need to protect the tenants deposit in case things go bad between myself and my tenant, im aware now that i should have done this sooner.

my question is should i issue him with a new AST then protect the deposit.

and when the AST lapses into a periodic tenancy after 1 year and do nothing is the deopsit still protected.

thanks for any advice

[Grampa]

First off if you haven't re-protected the deposit (within 30 days) now the tenancy has gone periodic there is no going back you are liable for a claim of up to x3 the value of the deposit. The law is clear on this and there is no grey area. But you do have a number of options open to you which will reduce your liability and can muddy the waters.

1 Do nothing and take the risk that your tenant will never find out or you wont ever fall out with him. This is risky and not advisable in my opinion. The tenant grapevine regarding the implications of this court case and a easy way to make money at the expense of the landlord are building momentum. Also if it went to court you are at risk of getting penalised the full x3 value. You also have the knock on effect of not being able to evict using a s21 notice.

2 Return the deposit to the tenant. This doesn't stop a claim but as the penalty is UP TO 3X the value of the deposit it is very likely you will not get penalised the full penalty. It will also help deter some claimant's if they don't understand the law fully.

3 Protect the deposit now and serve the prescribed information. If you do this it is very likely you will not get penalised the full penalty either as you have acted responsibly and promptly in respect to the court case. The down side is some tricky tenants who were not aware of the court case or implications will wonder why they are getting this paperwork do there own research which will highlight the issue to them which there were not aware of previously.

4 This is my preferred choice. Just draw up a nice new tenancy agreement and protect the deposit correctly. A new tenancy isn't out of the ordinary and shouldn't raise alarm bells and then renew it every six months if you can. Though it doesn't remove the liability it muddys the waters if the tenant takes their agreement to the council or CAB as it appears on the face of it everything is in order and it is very likely all the old AST were disposed of. Remember if you give a new contract you will have to do another new one when that ends and re-protect the deposit or re-protect it and serve PI again if it goes periodic, within 30 days of it ending.

Also note there are a number of ambulance chasing companies starting up who are asking tenants did your landlord do xyz regarding your deposit and if not call us etc etc etc.

These companies take approx 25% of the penalty won/claimed so if you do actions 2,3,4 which can reduce the x3 claim that may deter them taking on the case as the small claims route isn't used and it costs them a lot more. You still may get the threatening letter to frighten in paying though and it is up to you to decide to call their bluff or not.

I had heard the court case that has caused all this bother was to be appealed at a higher level but don't believe it as all three judges who sat on the case were in agreement.

[Mortitia]

Deposit protection became law on 1st April 2007 so there was no need to protect the original deposit if it was taken in the March of that year. All was quite legal.

The case Kanrent refers to is Superstrike V Rodrigues and that judgment now leaves the whole thing open to interpretation.

No case has yet been brought by a tenant against a landlord under this latest ruling. This could be because the small claims court is unlikely to take the case and the tenant would have to fund the case via the courts with expenses being high.

Under Supertstrike the tenancy that arose (Statutory Periodic Tenancy) after the 11 months of the fixed term (Assured Shorthold Tenancy) would require the deposit to be protected - but the Superstrike judgement was only handed down in June this year and it cannot be applied retrospectively.

You could either

1. return the deposit and do nothing more.

2. return the deposit and re-protect, serving the Prescribed Information and add a letter saying why you are taking this action.

Once a tenancy is outside the fixed term now I personally write to the tenant giving the PI again and reminding them where their deposit is. I also enclose a receipt to be signed by the Tenant and returned to me in an SAE to say they have received the information. I believe this would be acceptable in a court as intent to continue the protection of the deposit.

[Grampa]

Deposit protection became law on 1st April 2007 so there was no need to protect the original deposit if it was taken in the March of that year. All was quite legal.

Yes it was until the Superstike ruling and that now applies to pre April 2007 tenancies that are still running on a periodic basis.

The case Kanrent refers to is Superstrike V Rodrigues and that judgment now leaves the whole thing open to interpretation.

No for once the law is quite clear and following the court case a periodic tenancy is a new tenancy and has to be treated as one and if not the penalties apply if taken to court.

No case has yet been brought by a tenant against a landlord under this latest ruling. This could be because the small claims court is unlikely to take the case and the tenant would have to fund the case via the courts with expenses being high.

Yes you are correct is doesn't go through the small claim route and the figures I have seen to take it to court are in the region of £1000 that's why its advisable to mitigate the potential claim and chose options 2-4 of my previous post to make it less desirable for these companies to take it on.

Not all cases are published that go to court but landlords who have been receiving these letters from companies acting for the tenants after taking legal advise are been advised to settle out of court because it is so clear cut and the risk of losing adds another 1k in legal fees and that doesn't include their own.

Under Supertstrike the tenancy that arose (Statutory Periodic Tenancy) after the 11 months of the fixed term (Assured Shorthold Tenancy) would require the deposit to be protected - but the Superstrike judgement was only handed down in June this year and it cannot be applied retrospectively.

Yes but a periodic period has occurred after the court case so it doesn't matter when it started. That is the nature of a periodic tenancy and now clarified by the court case.

You could either

1. return the deposit and do nothing more. This doesn't stop a claim even if the tenancy ends shortly afterwards but does mitigate the amount.

2. return the deposit and re-protect, serving the Prescribed Information and add a letter saying why you are taking this action. This still leave you open for a claim and also highlights a issue which the tenant may investigate

Once a tenancy is outside the fixed term now I personally write to the tenant giving the PI again and reminding them where their deposit is. I also enclose a receipt to be signed by the Tenant and returned to me in an SAE to say they have received the information. I believe this would be acceptable in a court as intent to continue the protection of the deposit.

Good practise as long as it is done within 30 days of it going periodic.

I don't profess to be a expert on this but do regularly attend legal courses taught by people with a lot bigger brains than me throughout the year, the most recent one being in November solely dedicated to deposit protection and the implications of the superstike case. That info is what I am reproducing here.

I also get my info from more than one legal source so get a balanced view and so far they are in agreement..

I do acknowledge though the chances of being penalised or taken to court are small but as the penalties can be harsh why take the risk so best to protect yourselves as much as possible,

[kanrent]

if in future the tenant fails to pay the rent can i evict with a different notice instead of using the section 21

[Grampa]

Only if 2 months in arrears/owing (= 1 month + 1 day) then you can use a section 8 with grounds 8,10,11 but if the deposit hasn't been protected correctly the tenant could counter claim the x3 deposit penalty value and get the arrears below 2 months which is likely to get the eviction hearing struck out.

If the deposit is a issue either protect it correctly or return it then you can use a s21. Just because you have returned the deposit doesn't mean the tenant isn't responsible for any damages it just means you have to chase them for it.

[kanrent]

thank you for your help Grampa just 2 more things

if my tenant takes me to court i can assume the worst possible scenario would be 3x the deposit plus return of the deposit which is 500 pounds that would =2,000 plus court costs which would be ? approx

after i settled that amount would i then be able to issue a s21

thanks for your advice

[Carryon Regardless]

Sorry if this is a bit of a hijack.

I've been considering this for a while. Aside from being really, really peed off that I am at risk of paying out big rewards to scabby T's and ambulance chasing companies for following what previously was set down to be the correct DPS procedure, I now see that taking deposits is just too risky.

I now feel that charging an admin fee at the outset instead of taking a deposit is favourable.

Now those T's that have trouble finding a £400 deposit only need find the £200 fee, the difference being they don't get it back.

The fact that we can't protect ourselves from the deposits we, well the DPs have, already is absolutely ridiculous. I wonder now if returning the deposit in exchange for the admin fee and a T signed disclaimer to claim might offer me/us protection ??

[Grampa]

It was made clear on the course that once you (landlord) have not protected the deposit, served the PI at the start of a tenancy and or within 30 day of a the tenancy going periodic (post superstike) you have gone over the precipice and cannot reverse your position and are liable for a future claim whether the tenancy has ended or not.

Yes you can hand the deposit back but the liability still exists. That's why I prefer the option of getting a couple of correctly done new tenancy agreements (maybe without a deposit) under your belt to muddy the waters.

Also when the tenancy ends maybe be a bit more flexible with deposit deductions to smooth the way for the ending of the tenancy and then get every thing in order for the next one.

[Grampa]

Sorry if this is a bit of a hijack.

I now feel that charging an admin fee at the outset instead of taking a deposit is favourable.

Now those T's that have trouble finding a £400 deposit only need find the £200 fee, the difference being they don't get it back.

I think it is a sensible option to consider it has certain pros and cons but if you get a good application form with loads of info about the tenant and a guarantor in place that would reduce the downside.

On top of the admin fee you could try increasing the rent whenever possible and maybe offer an verbally agreed incentive that you will refund say 50% of the last months rent if the property left in a acceptable condition, ready to re-let and the same condition as the inventory and give them Richlist's end of tenancy list.

I use Richlist's list amended to my own requirements and boy if the tenants follow it the property is spotless and ready to go,

[kanrent]

if i protect the deposit properly now (all be it late) will i be able to use the s21 in the future should i need to

[Melboy]

COR SAID: I now feel that charging an admin fee at the outset instead of taking a deposit is favourable.

Now those T's that have trouble finding a £400 deposit only need find the £200 fee, the difference being they don't get it back.

Good idea!

This deposit malarky has got absolutely ridiculous especially when you consider now that "No Win-No Fee" bar stewards are now involved.

[Carryon Regardless]

I am wondering how long it will be before we see the advertising of these ambulance chasers.

As I have many terminated tenancies, for varying reasons, I can see the risk to me being very significant.

I haven't heard of an MP standing up to defend this ridiculous situation, and many must be LL's. It's about time the trend for LL's being fair game changed.

The only real weapon I see we have is to serve S21's on mass and bury the courts and social services with the backlash. The outcry from the poor T's would be news worthy, The response from the Gov't should be then visible.

As we don't have to follow up with bailiff action the last step 'can' be our choice.

The crap we are potentially faced with is just plain wrong. As far as I am concerned I am guilty on all my tenancies for doing what the gov't told me to do, since 2007. And let's face it the deposit protection is a corruption in itself, even before this reallocation of funds to the 'needy'.

[Grampa]

if i protect the deposit properly now (all be it late) will i be able to use the s21 in the future should i need to

Yes

[Grampa]

COR SAID: I now feel that charging an admin fee at the outset instead of taking a deposit is favourable.

Now those T's that have trouble finding a £400 deposit only need find the £200 fee, the difference being they don't get it back.

Good idea!

This deposit malarky has got absolutely ridiculous especially when you consider now that "No Win-No Fee" bar stewards are now involved.

Or if you take council tenants use the councils deposit bond. But check the scheme first as they vary from council to council.