15 Years of Security Deposit Law
Would you believe it has been 15 years since Tenancy (Security) Deposit Law came into effect?! It seems like such a long time ago, but we are still seeing Swansea landlords trip up on the regulations and struggle to remain compliant.
Here’s a recap on what you need to do to comply and avoid any unnecessary risk.
From the 6th of April 2007, it became law for tenants’ deposits to be protected. Before this, there was little a tenant could do to reclaim their money should a rogue landlord decide to keep hold of it and spend it how they please.
Protect the tenants deposit within 30 days of receipt
The law is clear and extremely strict about how long a property owner has to protect their tenants’ deposit.
Initially, the security deposit had to be protected within 14 days of receipt, but this was changed in April 2012 to be within 30 days of receipt. To clarify: that’s within 30 days of the date the deposit was received, not from when the tenancy officially starts.
This change was made as many landlords were not able to keep to the 14-day rule. Under this previous condition, judges were lenient towards landlords who could prove the late protection was an administrative oversight; however, when the change to 30 days came into effect it was widely reported that no leniency would be shown for late submissions.
The security deposit has to be protected within one of three Government-backed schemes:
Providing the correct Prescribed Information
Similarly, landlords have 30 days from the date the security deposit is received to provide the new tenants with the Prescribed Information relating to the security deposit.
This is usually done at the commencement of the tenancy as it is best practice to get a copy of the Prescribed Information signed by the tenants for the avoidance of any doubt they received it.
But it isn’t enough just to provide the tenants with any old Prescribed Information document you can find online – it needs to be the Prescribed Information for the correct, corresponding security deposit scheme, and the correct scheme within that (if the protector offers custodial and insured).
Providing the Terms & Conditions for the relevant Deposit Scheme
Within the same 30-day timeframe, landlords are obliged to provide the new tenants with the terms and conditions for the correct, corresponding security deposit scheme. You may be required to proof you’ve sent it to them.
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Penalties for Non-Compliance
It is the landlord’s responsibility to understand all of their legal obligations. Tenancy (Security) Deposit Law is considered to be straightforward, and thus the penalties are quite large.
Firstly, where a landlord is found to be non-compliant on any of the above points, the tenants can expect the security deposit to be returned to them in full and then can also claim compensation of up to three times the security deposit amount.
Secondly, the landlord loses the right to serve a Section 21 Notice for Possession until the security deposit has been properly protected or returned to the tenant in full. This can be particularly complicated if the tenant is in rent arrears.
Due to the law being very clear, it is very easy for tenants to sue landlords for compensation if any of the elements of deposit protection are not adhered to.
The statute of limitations applies to this law, so even if a tenancy has ended, the tenants will have up to 6 years to make a claim if their security deposit was not protected compliantly.
My Agent Protects it for Me
As I said before, it is the landlord’s responsibility to understand all of their legal obligations. This bears repeating; even if an agent agrees to protect the deposit for you, the liability for doing it correctly remains with you as the landlord.
You need to be sure deposit protection is included within the service you’ve signed up for, and that your agent has robust processes in place not only to ensure this is done, but that it is recorded too.
Agents instructed to assist you on a Let Only or Tenant Find basis are more likely to pass the security deposit to the landlord to protect, so if you’re using this kind of service, but sure to check your financial statement carefully to note when the security deposit was received as even if the agent delays transferring you the funds, you still only have 30 days from when the deposit was paid to them to protect it.
Also, make sure you have a copy of the Prescribed Information if issued to the tenants by the agent for your records. If your agent does not issue this for you, make sure you have all the information you need to issue it yourself, as well as the relevant terms and conditions, within the right timeframe.
At Smart Lettings, we protect security deposits for both Managed and Let Only landlords with The Deposit Protection Service (The DPS); this includes deposit submission, issuing of Prescribed Information, and issuing of the relevant terms and conditions. For Let Only landlords, we protect will then transfer the security deposit to your account within the DPS, so there isn’t anything you need to do once the tenancy has started.
Copies of the signed Prescribed Information will then be sent to you along with the rest of the tenancy start paperwork for your records.
If you’re concerned your security deposit might not be protected correctly, please don’t hesitate to get in touch – call 01656 657033 or email lettings@smart-lettings.co.uk
