Getting Rid Of Tenancy Deposit Problems With The Deregulation Act 2015

The Deregulation Bill became the Deregulation Act 2015 on 26 March 2015 and has now been published. Sections 30 - 32 contain the provisions that amend the legislation concerning tenancy deposits.

Prescribed information given by agents

Section 30 amends The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 to clarify the position that where there is a reference to the landlord within the order, such a reference is to the landlord or the landlord’s agent. The changes result in either the landlord or agent details being inserted into the prescribed information as the provider wishes. The simplest way for agents is to match the tenancy agreement when inserting details into the prescribed information so everything is uniform. The changes are treated as if they were in effect from 6 April 2007, except if a section 214 claim for the penalty or a section 21 notice possession claim has been entirely determined before 26 March 2015. Where-

• a claim for a penalty or a section 21 possession claim was started before 26 March 2015 and
• that claim is ongoing on or after that date and
• the court decides not to allow a penalty, grants possession or allows an appeal by the landlord due to these changes.

The tenant will not be ordered to pay costs for that part of the claim.

Restrictions on a claim for a penalty for deposits received before 6 April 2007

Section 31 amends section 214(1) Housing Act 2004, which governs a claim for between 1 and 3 times deposit after a failure to protect or issue prescribed information. The change made means that a claim for the penalty from 26 March 2015 can only be made about a deposit which has not been protected where the deposit was received on or after 6 April 2007. 

The revised section 214(1) reads -

(1) Where a tenancy deposit has been paid in connection with a shorthold tenancy on or after 6 April 2007, the tenant or any relevant person (as defined by section 213(10)) may make an application to a county court on the grounds– (a) that section 213(3) or (6) has not been complied with in relation to the deposit, or (b) that he has been notified by the landlord that a particular authorised scheme applies to the deposit but has been unable to obtain confirmation from the scheme administrator that the deposit is being held in accordance with the scheme.

Please have in mind that if a deposit has been received before 6 April 2007 but the tenancy went statutory periodic on or after 6 April 2007 or there was a written renewal after that date, that is deemed as the receipt of a new deposit after 6 April 2007 and would be caught by this provision (but see later).

Service of a section 21 notice

Section 215 Housing Act 2004 has been amended by section 31. This section governs when a section 21 notice is prohibited from being served where there are deposit problems. The whole of section 215(1) is replaced and now provides (as far as relevant)-

(1) …, if (whether before, on or after 6 April 2007) a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when the deposit is not being held in accordance with an authorised scheme. (1A) …, if a tenancy deposit has been paid in connection with a shorthold tenancy on or after 6 April 2007, no section 21 notice may be given in relation to the tenancy at a time when section 213(3) has not been complied with in relation to the deposit.

The provisions allowing a deposit to be repaid in full or agreed deductions allowing service of a section 21 notice remain. This change to section 215 emphasises two occasions when a section 21 notice cannot be served.

1. Firstly, a section 21 notice cannot be served at a time when the deposit ‘is not being held in accordance with a scheme’. This is irrespective of when the deposit was received. Therefore, the landlord or agent must comply with scheme rules when the section 21 notice is being served. This would include paying any renewal fees, for example (if applicable).
2. The second part of the new section 215 is that where the deposit was received on or after 6 April 2007, not only must the deposit be held following scheme rules as above, but also, it must have been protected (complied with the initial requirements) within 30 days.

The result of this new provision is that if a deposit was received before 6 April 2007 and the tenancy went statutory periodic before 6 April 2007, to serve a section 21 notice, the deposit must be first protected or repaid in full. The earlier amendments relating to the penalty clarify that no penalty will be payable despite any late protection. If, however, the deposit was received on or after 6 April 2007 and the deposit was not protected within 30 days (since Localism Act changes from 6 April 2012), then just as before the changes, no section 21 notice may be served unless the deposit is repaid in full or agreed to deductions.

Superstrike deposits

Section 32 inserts a new section 215A into the Housing Act 2004 to deal with deposits received before 6 April 2007, AND the tenancy went statutory periodic on or after 6 April 2007. As a result of the Superstrike case, the duty to protect these deposits was triggered by the new statutory periodic tenancy that arose. 

The Deregulation Act 2015 enshrines Superstrike into law but gives a period of amnesty for landlords and agents who the case may have caught out. Where all or some of the deposit is still being held (unprotected) by the landlord or agent AND the statutory periodic tenancy is still in force on 26 March 2015, the landlord or agent must protect the deposit and issue prescribed information before the end of 90 days from 26 March 2015. No penalty will be payable if that is done, and any section 21 notice served will be valid.

The date for compliance may be less than 90 days if there are ongoing court proceedings and an order is made for protection sooner. If the statutory periodic tenancy has ended before 26 March 2015 or the whole deposit is no longer being held before that date, it is deemed that the landlord did comply with deposit protection within appropriate time scales and, as a result, no further claims for the penalty can be made in respect of this type of deposit. The provision is treated as if it were in effect from 6 April 2007, except if a section 214 claim for the penalty or a section 21 notice possession claim has been entirely determined before 26 March 2015. Where-

• a claim for a penalty or a section 21 possession claim was started before 26 March 2015 and
• that claim is ongoing on or after that date and
• the court decides not to allow a penalty, grants possession or allows an appeal by the landlord due to these changes.

The tenant will not be ordered to pay costs for that part of the claim.

Periodic tenancies and renewals - re-issue of prescribed information

A new section 215B Housing Act 2004 is inserted, which deals with renewal tenancies. Where a deposit has been received on or after 6 April 2007 (including a deposit received before that date but is deemed received after that date due to a periodic or renewal tenancy) and all of the following also applies-

• the deposit has been protected
• prescribed information in relation to the deposit has been given
• a new tenancy comes into being or replaces the original tenancy (whether directly or indirectly)
• the new replacement tenancy is between the same landlord(s), same tenant(s) and substantially the same property
• the deposit continues to be held following the same scheme as it was last protected with

Then, any requirements to re-protect the deposit or re-serve prescribed information about the new replacement tenancy are treated as if they had been complied with by the landlord or agent. The result is that no further action is required after the initial protection, and prescribed information is not required to be given again. This includes a statutory periodic tenancy and a written renewal (where it’s between the same landlord, tenant and property). 

It is important to note that there must have been some protection originally and the correct prescribed information for this to apply. If there were a failure to give accurate prescribed information, there would also be a failure for each renewal or statutory periodic tenancy. 

There is no change to the current rules that prescribed information can be given late to allow service of a section 21 notice (but the penalty of between 1 and 3 times the deposit plus the return of the deposit will be payable upon application by the tenant). 

Just as before these changes, where a deposit has not been protected within 30 days, there is little point in protecting because the penalty would nonetheless be payable, and no section 21 could be served. 

The best advice where a deposit has not been protected in time is to repay the deposit in full or agree to deductions. The quicker this is done, might assist with ensuring as low a penalty as possible. 

The changes are treated as if they were in effect from 6 April 2007, except if a section 214 claim for the penalty or a section 21 notice possession claim has been entirely determined before 26 March 2015. Where-

• a claim for a penalty or a section 21 possession claim was started before 26 March 2015 and
• that claim is ongoing on or after that date and
• the court decides not to allow a penalty, grants possession or allows an appeal by the landlord due to these changes.

The tenant will not be ordered to pay costs for that part of the claim.