A report by the Centre for Economics and Business Research (CEBR) and money.co.uk has revealed that despite deposit protection laws being in place since April 2007, many landlords are still not handling deposits properly with over £500m being held incorrectly.
One in six landlords in the UK are either unaware of the proper procedures involved in handling a tenant’s deposit, or unwilling to comply with the legislation, and in turn are breaking the law.
With thousands of households across the UK reliant on private rental market, it is a real concern that 15% of UK landlords are still not compliant with the scheme. According to the research, the average rental deposit in the UK is now a not insubstantial £1,040, and as rental rates rise, it is likely that this figure will increase.
The landlords who are failing to handle deposits correctly are leaving themselves open to a series of serious risks. By breaking the Tenancy Deposit Protection legislation (part of the Housing Act 2004), they are able to be prosecuted, which could lead to a fine of up to three times the value of the original deposit.
In addition, by failing to protect the deposit correctly, and issue the tenants with the correct Prescribed Information and certificate from the tenancy deposit scheme, the landlord loses the right to issue a Section 21 notice should they need to regain possession of the property at any time during the duration of the tenancy. It might be assumed that failure to protect the tenant’s money properly would be a risk to the tenant, but realistically, it poses as much of a concern to the landlord.
‘Many landlords are doing the right thing and protecting deposits in one of the official government backed schemes, a worrying amount of money is falling through the cracks and far too many tenants are being left vulnerable, ’ said Hannah Maundrell, editor-in-chief at money.co.uk.
It’s not all bad news though. Despite the one in six that are not compliant, the research proved that the majority of landlords in the UK are working under the regulations, and with around £3.2 billion of deposits being held in tenancy deposit schemes, it is a positive sign!
So, what is the correct procedure to ensure that you are not one of the 284,000 landlords who is putting themselves at risk?
1. All Assured Shorthold Tenancy deposits must be registered in a custodial or insurance based scheme
2. The landlord (or agent) must issue Prescribed Information to the tenant and any relevant person (individual, company or organisation who has contributed to the deposit on behalf of your tenant) within 30 days of receiving the deposit.
- The Prescribed Information includes:
- The address of the property that deposit has been taken for
- How much deposit has been paid by the individual you are sending the information to
- How the deposit is protected
- The name and contact details of the tenancy deposit protection (TDP) scheme
- Details of the TDP scheme’s dispute resolution service
- Your name and contact details
- The name and contact details of any third party that’s paid the deposit
- What would lead to you holding some or all of the deposit back
- How your tenant can apply to get the deposit back
- What to do if they can’t get hold of the you at the end of the tenancy
- The actions they have to take if there is a dispute over the dispute over the deposit at the end of the tenancy
3. Your chosen TDP Scheme will issue you with a certificate showing what has been taken and how much is being held on your behalf. You must provide a copy of this to your new tenants, and any third parties, within 30 days of taking the deposit.
For more information on deposits, contact the team at Urban.co.uk at firstname.lastname@example.org or 0800 689 9955
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