Tenancy Disputes: An Update

Landlords and Tenants of residential properties have been aware of the need to protect Tenants' deposits within authorised schemes since 2007. That obligation is clear, but there has been much confusion surrounding the penalties which apply to the Landlord for failing to comply with the protection obligations. A proposed change in these regulations, contained within the Localism Act 2011, seeks to clarify the position and override the previous case law of which rendered the previous penalty system useless.

Since 2007, the Housing Act 2004 has contained an obligation on Landlords to protect a deposit within 14 days of the date of receipt. At first glance, the Act contains a penalty for failing to protect the deposit. That penalty has been three times the value of the deposit itself. In two Court of Appeal cases, the Court has interpreted these provisions to effectively mean that the Landlord can in almost all circumstances avoid liability for the penalty. That is the current position, but if the provisions in the Localism Act 2011 are brought into force then this will strengthen the tenant's position once again. The new provisions will reverse the two Court of Appeal cases and will include the following amendments:

The deadline in which the Landlord must protect the deposit is extended from 14 days to 30 days. The Court has a discretion as to the value of the financial penalty for non-compliance at between one and three times the value of the deposit. The Court has...