Over the past two years if the economic downturn has taught landlords anything, it is to be forward thinking, get the documentation right and get a tenancy deposit from all tenants.
Unfortunately taking a deposit needs to follow the required procedure or landlords run the risk of expensive litigation and compensation awards.
Louise Hebborn, an associate solicitor at Stephensons Solicitors LLP, acts for landlords in tenant disputes. She says: “The best advice is to get the procedures right to avoid the risks of claims.”
Tenancy deposit schemes were designed and introduced to protect tenants from the minority of landlords who refused to return tenants deposits for no apparent reason after the termination of the tenancy.
For those who are not aware, landlords who fail to pay the deposits into a designated scheme and/or give their tenants the required information about the scheme within 14 days of receipt of the deposit can face compensation claims by tenants. These can be up to three times the amount of the deposit as well as the return of the deposit.
Louise adds: “Very few Judgments relating to compensation have been published, but of those that have, it seemed that the lower courts were applying the rules sensibly.
“It was widely thought that tenants’ claims for damages would not succeed if the landlord had paid the deposit into a designated scheme and provided the tenant with the required information, even if the landlord had not done so at the correct time.
“It now seems that not all District Judges are following the same approach and landlords are being penalised for minor procedural errors. This means that where a landlord has not paid the deposit into a scheme within the time frame, or not given the tenant the required information about the scheme, the landlord still risks a claim for damages even if he has remedied his error.”
Clearly this involves a potential windfall for tenants who have suffered no loss as a result of the landlord’s error. This has particularly worrying consequences when the tenant making the claim still has an existing tenancy and the landlord may be left without the protection that the deposit affords.
There has not been any guidance from the higher courts on the law in this area and it would be interesting to see what view the appeal courts will take.
What Can Landlords Do?
In the meantime all landlords should ensure that they fully understand what they have to do when they take a deposit, that the deposit is paid into an appropriate scheme and that the tenant is given full information about the protection of the deposit. Landlords should seek urgent legal guidance if they don’t.
ENDS
Notes to editors
Louise acts for developers, portfolio managers, investors, landlords and tenants in many disputes concerning land and landlord and tenant cases involving business premises and commercial investments.
The latest edition of Legal 500 ranks Stephensons as a top 60 UK law firm and the fifth largest legal practice in the North West. The firm has 26 partners and more than 300 staff in Manchester, Wigan, Bolton, Leigh and St Helens.
Media information: Lianne Tracey
Stephensons Solicitors LLP
T: 01616 966 229