Tenants, Deposits and Dispute Resolution

 

In the current economic climate where an increasing number of people are having their homes repossessed, the market for rented accommodation in the private sector is growing.

The assured shorthold tenancy is the most popular type of tenancy granted by private landlords. They are for a fixed term and only afford limited rights and security to the tenant. This means it’s easy to evict the tenant if they are causing problems or the landlord simply wants vacant possession of the property. An attractive tenancy! 

Despite this, the savvy landlord needs to be aware of the changes in the law towards the protection of these types of tenant.

The most important legislative change is the protection given to assured shorthold tenants for the recovery of their deposits. 

The purpose of a deposit is to provide the landlord with financial security, in case the tenant decides to pull out of the agreement, and safeguard the landlord against any damage caused to the property during the tenancy. 

Historically, some landlords have abused the system of collecting deposits by either failing or refusing to return deposits at the end of the tenancy. Tenants have been left with no viable means of recovering this money.

Under the Housing Act 2004, as from 6th April 2007 all new deposits received by landlords in relation to an assured shorthold tenancy have to be secured in one of two schemes: One holds the deposit directly whereas the other provides insurance cover should the landlord fail to repay the deposit. This is designed to ensure that the deposit is returned to the tenant at the end of the tenancy and that any disputes that may arise between the landlord and tenant over the deposit are resolved. 

If the landlord fails to register the deposit with one of the prescribed schemes and does not comply with the requirements of that particular scheme the landlord can suffer severe penalties such as the following:

•  be taken to court and fined up to three times the value of the deposit

•  forfeit their right to evict the tenant with two months notice after the expiry of the fixed term

The case of Harvey – v – Bamforth served as a timely warning to landlords that they must comply with the requirements of the chosen prescribed scheme.

In this case the landlord had registered the deposit in a prescribed scheme but then failed to comply with their obligation to provide the tenant with relevant information concerning the scheme.

The District Judge found that the landlord was in breach of their obligations under the legislation and ordered the landlord to pay a fine of £1,500.00.

Although this decision was overturned by the Circuit Judge on appeal, the case has served as a wake up call to landlords to understand and comply with their obligations when asking for a deposit.

For more information please contact Newsome Vaughan LLP on 024 7663 3433 and ask to speak to one of our solicitors in the Civil Litigation Department.