When you are sign up to a new tenancy agreement and commit to pay the rent and your deposit you want to know that your deposit will be protected. It’s best to understand what will happen if your landlord either fails to protect your deposit or there is a deposit dispute. In this article our landlord and tenant senior caseworker, Nollienne Alparaque, looks at the topic of deposit protection and what you can do as a tenant if you discover that your deposit hasn’t been protected.
Landlord and tenant solicitors
What is deposit protection?
Tenancy deposit protection was introduced in 2007 for tenants taking assured shorthold tenancies in England and Wales where a deposit is requested by the landlord or their letting agent.
The law requires a landlord or their letting agent to:
- Register a deposit in one of the Government approved deposit schemes within thirty days of receiving the tenant’s deposit and
- Provide the tenant with specified information about the tenancy deposit scheme.
Can a landlord contract out of the deposit scheme?
If a landlord requires a deposit from the tenant, the law doesn’t allow the landlord offering a tenant an assured shorthold tenancy to opt out of the deposit scheme. Therefore, even if the tenancy agreement says that a deposit will be taken but the specific assured shorthold tenancy is contracted out of the deposit scheme, this is incorrect.
The only way that a landlord or their letting agent can contract out of following the law is by not asking for a tenancy deposit.
Furthermore, a landlord or their letting agent can't tell a tenant that they will be using a non-approved deposit scheme as the law says that a landlord must use one of the deposit schemes approved by the government.
What are the approved deposit schemes?
There are currently three approved deposit schemes, namely:
- The Deposit Protection Service.
- The Tenancy Deposit Scheme.
The deposit schemes offer two different types of deposit protection, namely:
- Custodial or
Either type of deposit protection will protect the deposit . The choice of approved provider and the type of deposit protection will be chosen by the landlord or by their letting agent.
What is custodial deposit protection?
In brief, custodial deposit protection is where the approved deposit scheme takes custody of the deposit to protect it according to the rules of the approved scheme.
What is insurance deposit protection?
With insured deposit protection the landlord or letting agent retains the deposit but they pay an insurance fee to insure and safeguard the deposit. Most landlords prefer to use the custodial scheme as it is free of charge but either type of scheme offers approved deposit protection.
The deposit protection certificate
The law says that a landlord is under a legal obligation to provide a deposit protection certificate if a tenant takes out an assured shorthold tenancy and provides a deposit. The deposit protection certificate is confirmation that the deposit has been placed in either a custodial or insurance scheme with one of the three approved deposit protection providers.
The landlord or their letting agent must provide the deposit protection certificate within thirty days of receipt of the deposit. If a landlord knows that a third party (for example, a parent or a partner) has paid or contributed towards the deposit then they also need to be provided with a deposit protection certificate.
What happens if a tenant doesn’t get a deposit protection certificate?
If a tenant either:
- Doesn’t get sent a deposit protection certificate or
- The deposit protection certificate is received late (more than thirty days after the deposit was provided by the tenant to the landlord or their letting agent).
Then the tenant may be entitled to claim compensation. The compensation claim is meant to act as a deterrent to landlords not complying with the law on deposit protection.
How much compensation is paid?
The law sets out the maximum compensation payable for a landlord’s failure to protect a deposit or to provide a deposit certificate within thirty days. The maximum compensation a tenant can get is one to three times the amount of the deposit.
Time limits for deposit compensation claims
Many landlords and tenants think that deposit protection compensation can't be claimed after the end of a tenancy agreement but that is incorrect. A tenant may have up to six years to make a deposit compensation claim.
A claim can be made even if a landlord returned the deposit at the end of the assured shorthold tenancy agreement. That’s because the landlord will have still broken the law if the tenant wasn’t provided with a deposit protection certificate or the certificate was sent late.
Who determines deposit compensation claims?
If a landlord and tenant are in dispute over whether a landlord breached their deposit obligations, or over whether compensation should be paid, or the amount, then a tenant can bring a court claim. It is best to take specialist legal advice before starting a court claim. For example, a tenant may be entitled to more compensation than they think if they entered into a series of tenancy agreements with their landlord.
Landlord and tenant solicitors
- Tenancy agreements – including assured shorthold tenancy agreements.
- Deposit protection advice – whether a landlord has provided the correct prescribed deposit information within the thirty-day deadline or failed to use a deposit protection scheme to safeguard a tenant’s deposit. It is best to take legal advice on a potential claim as, for example, a claim may arise even if a tenant received notice but didn’t get all the prescribed information or if the form was not signed by the landlord or letting agent.
- Deposit protection compensation claims – these claims can be resolved by negotiation or a county court claim.
- Rent arrears and possession claims and the impact on a possession notice if the landlord failed to comply with the law on deposit protection. For example, a landlord usually can't serve a valid section 21 possession notice if they didn’t comply with deposit protection law (although they could try to remedy this). If a landlord serves a section 8 possession notice, without having complied with deposit protection law, then a tenant can counter claim and request compensation.
- Deposit dispute claims at the end of a tenancy agreement where the landlord is seeking to retain all or a proportion of the deposit.
Landlord and tenant solicitors