Deposit Protection Rules Change
Since April 2007 all deposits provided by residential tenants have to be protected in a Government approved scheme by the landlord. If the money was not secured within 14 days of receipt then the tenant could make a claim for repayment of the deposit plus a fixed penalty of 3 times the deposit.
In addition until the deposit was protected the landlord could not use the Section 21 route to gain possession. This is often the preferred route as it is not based on fault and usually is dealt with without a hearing on papers and is therefore cheaper for the landlord. Landlords were keen to keep this option open and would protect the deposit at the last minute to allow them to claim possession this way and avoid the penalty.
This is not what was intended and there were several cases about the interpretation of the rules and the Government recently took the opportunity to close the loopholes in the law.
As of 5 May 2012, the law changed to state that if a deposit is not protected within 30 days of receipt then the Section 21 route is closed to the landlord until the deposit is returned to the tenant. Returning a deposit not only puts a landlord at risk in relation to property damage and rent but also prompts the tenants that there is a problem and may lead to them bringing a claim for the penalty. The amount of the penalty remains as 3 times the deposit as a maximum but can be lower in the Court’s discretion but the law change has still tightened the position and encourages landlords to comply with the rules from the start.