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Protecting deposits

Coronavirus: Landlords and Renters

The government has brought forward a package of measures to protect renters affected by coronavirus (COVID-19). With these in force, no renter in either social or private accommodation will be forced out of their home.

https://www.gov.uk/guidance/government-support-available-for-landlords-and-renters-reflecting-the-current-coronavirus-covid-19-outbreak

  • From 26 March 2020 landlords will have to give all renters 3 months’ notice if they intend to seek possession. This means the landlord can’t apply to start the court process until after this period.
  • From 27 March 2020 the court service will suspend all ongoing housing possession action. This means that neither cases currently in the system nor any about to go in the system can progress to the stage where someone could be evicted.
  • Tenants are still liable for their rent and should pay this as usual. If they face financial hardship and struggle to pay this, support is available and we would encourage tenants and landlords to work together to put in place a rent payment scheme.
  • Landlords will also be protected by a 3 month mortgage payment holiday where they have a Buy to Let mortgages.
  • Landlords remain legally obligated to ensure properties meet the required standard – urgent, essential health and safety repairs should be made. An agreement for non-urgent repairs to be done later should be made between tenants and landlords. Local authorities are also encouraged to take a pragmatic, risk-based approach to enforcement.

Any sum of money taken for a tenancy which is intended to be returned to the tenant, whether subject to certain conditions or not, is likely to be classed as a deposit. 

  • If a landlord takes a deposit from a tenant under an Assured Shorthold Tenancy, that landlord is legally required to protect the deposit in an approved scheme
  • If the deposit is not protected, or required information is not provided to the tenant, then
    • no Section 21 Notice can be served until the landlord has remedied the failure, and
    • the tenant can ask a court to order the return of the deposit plus a penalty of up to three times the amount of the original deposit. 

Thus by not protecting a £800 deposit a landlord could be ordered to pay back the tenant up to £3,200 - leaving them significantly out of pocket and with no money left set aside to cover any tenant damage.

Different rules for different tenancy start dates

  • However different rules apply according to when the tenancy started.  Questions 1-4 below will help to decide which rules apply. 
  • If you are sure no deposit was paid then you can ignore Questions 1-4 so please go directly to our page on serving Section 21 Notices.

Question 1: Did the tenancy begin before April 6th, 2007?

  • No – Please go directly to Question 4
  • Yes – Please go to Question 2

Question 2: Did the tenancy start before April 6th, 2007, and also did it have a fixed term that ended before April 6th, 2007?

Please see the Further Information Table at the end of this page for a definition of fixed term.

  • No – Please go to Question 3
  • Yes – Because of the tenancy start date, the landlord is not in breach of the deposit protection rules, so the tenant cannot claim any compensation for the landlord not having protected the deposit.  However, if the landlord wants to serve a valid Section 21 Notice now, this will not be allowed unless any deposit taken has been protected or returned.  To serve a valid Section 21 Notice, the landlord can either a) protect the deposit or b) return the amount of the deposit to the tenant (get a receipt).  Now please go to the page on Evicting your Tenant.

Question 3: Did the tenancy start before April 6th, 2007, and also did it have a fixed term that ended on or after April 6th, 2007?

  • No – please review your answer to Question 2
  • Yes - the situation is the same as the “Yes” answer for Question 4.

Question 4: Did the tenancy start on or after April 6th, 2007?

  • No - please review your answer to your previous question
  • Yes - The deposit should by now have been protected.  This is the case for any tenancy that started on any date between April 6th, 2007 and today's date.  If the deposit (or any part of it) hasn’t been protected within 30 days of receiving it from the tenant, any Section 21 Notice served will be invalid, and the tenant can claim compensation.  If you try to protect the deposit now, it will be too late to prevent any Section 21 Notice you serve being invalid (unless you have protected the deposit within 30 days of receiving it).  Therefore in order to serve a Section 21 notice now, you will need to repay the amount of the deposit back to the tenant (get a receipt) and then serve a new notice.

Before serving any Section 21 Notice, landlords must ensure that any deposit has been protected in accordance with the law and that the tenant has been sent the relevant "Prescribed Information" which the landlord can download from each scheme's website. 

Normally at the end of the tenancy, the deposit protection scheme where the money has been protected either

  • releases a sum of money agreed by the landlord and tenant for return to the tenant; or
  • offers an arbitration procedure if there is a dispute over damage to the property or other matters,  

Time Limits:-

  • If the tenancy started before 6th April 2012, the deposit had to be protected within 14 days of receiving it (or part of it).  After 6th April 2012, it had to be protected within 30 days of receiving it (or part of it).  In both cases the landlord must also have provided the prescribed information giving the tenant details of the protection etc. 

How can a landlord who has failed to protect a deposit serve a Section 21 Notice?

  • Repay the deposit early: If the landlord has not protected the deposit correctly, then the landlord will not be able to serve a valid Section 21 Notice.  The purpose of the landlord repaying the deposit directly to the tenant before the end of the tenancy is to remove a legal obstacle to serving a valid Section 21 Notice if such an obstacle exists.  A receipt should always be obtained from the tenant.  Repaying the deposit means that the landlord may then serve a valid Section 21 Notice, but courts can still award tenant compensation if the rules weren’t complied with.  
  • Agree with the tenant for a proportion of the deposit to cover money or certain costs owed to the landlord and at the same time refund any balance - but again this agreement should be made in writing so the landlord can it prove to the court if necessary.
  • Note that although refunding the deposit or agreeing a part of it to cover outstanding tenant costs will remove an obstacle to serving a Section 21 Notice, nothing can stop the tenant still claiming compensation through the courts against a landlord who failed to protect the deposit in the way required by law. 

But if all the deposit protection rules were complied with from the start and the deposit was properly protected, It will not be necessary to repay the deposit before the end of the tenancy.  Therefore repayment of the deposit to the tenant after the end of the tenancy can be arranged by the landlord acting through the deposit protection scheme where the deposit was originally placed.

Repossessing a Rented Property

If you are a landlord seeking to repossess a rented property using a Section 21 Notice, then the Section 21 Notice will be deemed invalid by the court if you have not complied with the rules described on this page.  If however you have complied with these rules, you can proceed in accordance with the law as set out on our page about Evicting your Tenant