The deposit protection rules were introduced to scupper unscrupulous landlords, but that doesn’t mean those who play by the rules should be penalised. Rob Cooke outlines how to make the legislation work for you...
I have been advised to always serve a section 21 notice when moving a new tenant into my property. Is this in breach of the laws protecting deposits?
It is common practice for landlords to issue section 21 notices on the day tenancy agreements are signed to reduce the problems associated with asking tenants to leave. However, at this point the deposit has not yet been registered or the prescribed details provided about its location.
An assured shorthold tenancy must be for a minimum of six months. If your tenant complies with all the terms of the agreement, you can regain possession at the end of this period, as long as you serve the correct notice to bring it to an end. This notice is covered by section 21 of the Housing Act 1988 and may be used at any time. It must give the tenant at least two months warning and cannot expire until six months after the start of the tenancy or before the end of any fixed term period. If your tenant will not leave, you must then seek a court order to gain possession.
As most landlords are aware, if you accept a deposit as insurance against damage to your property, it must be lodged with a government approved scheme and the tenant given information about your chosen method of protection within 30 days of payment.
Failure to comply with the rules could land you in court and if the case is upheld, you will be ordered to pay between one and three times the amount of the deposit to the tenant. In addition, landlords who disregard the legislation cannot serve a section 21 notice. In a recent case, a landlord who issued a section 21 notice when signing up his tenant was taken to court on the basis it was invalid because the deposit was not protected when it was served.
he court decided – in my opinion, correctly – that the landlord was not in breach of the deposit protection regulations, as he had 30 days to register the bond with a recognised scheme and deliver the prescribed information.
It also ruled the sanctions that can be imposed under the Housing Act for failure to register a deposit only apply if the landlord does not comply with the 30 day period. In this case, the regulations were adhered to and therefore, the section 21 notice was deemed effective, even though it was served before the deposit was protected.
This is good news for landlords. Serving a section 21 notice in this way is a practice I endorse, although you must follow the deposit protection rules to the letter to avoid leaving yourself open to a potential claim. Provided the pre-tenancy notice was served correctly, you can request possession at any time, as long as you give two months notice. If the tenant will not leave when this period expires, the court will have no choice but to grant you a possession order.
There are three deposit protection schemes from which to choose and landlords must determine the one that best suits your needs. My experience is that letting agents and landlords with multiple properties tend to use one of the two insurance policies, whilst those with only a few self-managed properties choose the Deposit Protection Service’s custodial option.