New guidelines outlined for Deposit Protection

The government have recently outlined new guidelines under The Localism Act for deposit protection, amending the Housing Act of 2004.

As of April 6th 2012, the timescale and penalties are changing, as well as certain loopholes in the legislation being closed.

Steve Harriott, Chief Executive of The Dispute Service said "Everyone involved in lettings should understand the principles behind deposit protection and alternative dispute resolution. They should be aware of the legal penalties that can be incurred and the benefits of being able to safeguard money and how to avoid time consuming and costly court hearings in the event of a dispute".

Landlords and agents now have a longer time period within which to register the deposit. This has been increased to within thirty days of receiving the deposit, rather than the fourteen days which were previously permitted.

This timescale has also been applied to the landlord or agent's responsibility to provide prescribed information about the deposit protection to the tenant. This includes; amount of deposit, details of the landlord, tenant and any third parties, details of the scheme used and how it operates and details of the landlords rights to retain the deposit in certain circumstances.

The penalties have been amended in the new deposit protection legislation so instead of the previous mandatory penalty of three times the amount of the deposit, courts can now penalise landlords and agents between one and three times the amount of the deposit, on a discretionary basis.

Loopholes in the previous deposit protection legislation have also been addressed. A landlord or agent could previously register the deposit after the fourteen day period had passed, without receiving any penalties, as long as it is registered before the case is taken to court. This is now no longer the case; as soon as the thirty days have passed, it is a breach of the new legislation and the tenant or tenants have the right to issue proceedings against the agent or the landlord.

The Localism Act also has an effect on the serving of Section 21 notices to tenants. Notices can not be served if the deposit has not been registered within thirty days of being received. The exceptions to this ruling are if the tenant has had the deposit returned to them or an application to the county court has been made.  

It is important that landlords review the deposit protection changes that are coming into force and ensure they understand their obligations to their tenants.    

Walton Robinson
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