Residential landlords who do not observe the TDS protection rules, introduced 6 April, will have to pay substantial fines to their tenants.
Landlords in England and Wales who fail to comply with the new law requiring them to protect tenants’ deposits could be ordered by the courts to pay the tenant a penalty of three times the amount of the deposit.
With total deposits held by landlords amounting to an estimated £1.2 billion and 40 per cent of the 2.2 million tenancies rolling over each year, the potential windfall for the nation’s renters could amount to tens of millions of pounds.
David Salusbury, chairman of the NLA, said: “The majority of landlords treat their tenants fairly and return deposits promptly, less the cost of any legitimate damage or repairs. However, the government is taking a tough line to weed out rogue operators and the new laws will apply to all landlords, large or small, who let properties under an Assured Shorthold Tenancy after 6 April 2007 and take a deposit. There is no escape.”
Under the regulations a landlord will be required within fourteen days to provide details to the 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, or for the prescribed information to be given to him or her. If the court is satisfied that the landlord has failed to comply with these requirements (or is not satisfied that the deposit is being protected by a government-authorised scheme), the court must order the landlord to pay an amount equivalent of three times the deposit to the tenant within fourteen days, and either repay the deposit to the tenant or protect it in the authorised custodial scheme. The landlord would no longer be able to use notice-only (“Section 21”) grounds for possession until the deposit in question was protected.
David Salusbury continued: “This penalty applies to each and every tenancy, and each and every deposit which is not protected. For a portfolio investor with a hundred or more properties, non-compliance could be extremely costly indeed, not only financially but also in terms of reputation: this would be very damaging to a landlord’s business. With an estimated £1.2 billion held by way of deposits, in a worst case scenario we could see millions, maybe even tens of millions of pounds, being paid by landlords to tenants in penalties. Indeed, this could put some landlords out of business.”
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.
Salusbury concluded: “As the UK’s leading landlord association, we have a clear commitment both to raising standards in the industry and ensuring that landlords are fully aware of their rights and responsibilities. The financial implications of non-compliance with the new law are serious and this should be a wake-up call for landlords who have not yet prepared themselves for tenancy deposit protection.”
