Tenancy deposits are usually taken by landlords to provide the landlord with a degree of security against damages, unpaid rent or other loss the landlord may suffer as a result of the tenant.
When a tenancy deposit is taken in relation to an assured shorthold tenancy agreement (in England) or an occupation contract (in Wales) the law requires that the landlord protects the tenancy deposit with a government authorised tenancy deposit scheme.
A tenancy deposit scheme safeguards tenancy deposits paid in connection with agreement between the landlord and the tenant with the aim of preventing landlords or tenants unreasonably claiming the deposit, or part of it.
The tenancy deposit scheme only applies to assured shorthold tenancy agreements and occupation contracts, if you are not sure whether the tenancy deposit scheme applies to you, you should seek legal advice.
There are two requirements of the tenancy deposit scheme, they are:
- Tenancy deposits must be protected with a government-authorised tenancy deposit scheme within 30 days of the tenancy deposit having been paid .
- The prescribed information relating to the tenancy deposit must also be provided to the tenant (and any third party who paid the tenancy deposit) also within 30 days of the tenancy deposit having been paid.
Consequences of Non-Compliance with Tenancy Deposit Scheme
There are two consequences for failing to comply with the requirements of the tenancy deposit scheme, they are:
- A tenant may claim from 1-3 times the value of the tenancy deposit.
- No section 21 notice can be served on the tenant (England).
- A no-fault notice cannot be served on the contract-holder (Wales).
The restrictions on serving a no-fault eviction notice (such as a section 21 notice in England, or no-fault notices in Wales) is only lifted if:
- The tenancy deposit is returned to the tenant (or third party who may have paid the tenancy deposit);
- Where a Court has made a determination of a tenants claim relating to the landlords failure to comply with the tenancy deposit scheme under s.214 of the Housing Act 2004 (England); or
- Where a Court has made a determination of a tenants claim relating to the landlords failure to comply with the tenancy deposit scheme under Paragraph 2, Schedule 5 of the Renting Homes (Wales) Act 2016.
Protecting the tenancy deposit late or serving the prescribed information late (outside of the 30 days’ requirement) will not rectify the breach, lift the above restrictions or prevent the above consequences from applying.
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