From 6 April 2007, landlords in England and Wales who do not observe new tenancy deposit protection rules, could be ordered by the courts to pay their tenant a penalty of three times the amount of the deposit.
Total deposits held by landlord’s amount to an estimated £1.2 billion and 40 per cent of the 2.2 million tenancies roll over each year, making the potential windfall for the nation’s renters tens of millions of pounds.
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David Salusbury, chairman of the NLA, warned: “Landlords who continue taking deposits from tenants need to join one of the three government-authorised schemes. No other tenancy deposit protection scheme will be permitted under the law.
“For a portfolio investor with 100 or more properties, failing to register under the new scheme could potentially be extremely costly.”
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Under the regulations a landlord will be required within 14 days to provide details to the new tenant of the scheme used to protect the tenant’s deposit. If the landlord fails to protect the deposit, the tenant can apply for a court order requiring the deposit to be protected.
Jonathan Burridge, managing director at Quantum Mortgage Brokers, argued that the impact on the buy-to-let market would be minimal. However, he questioned how many landlords and property investors had been made fully aware of the findings.
He said: “This should not affect buy-to-let as this will be an arrangement between the tenant and the landlord. Regulation for landlords and letting agents can only improve consumers perception of them. It would be interesting to know how many landlords are aware of this new scheme.”
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