Tenancy Deposit Schemes - Complacency is not advised

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21 June 2011

The Tenancy Deposit Scheme regulations oblige landlords and their agents to safeguard deposits paid by tenants and to provide information to the tenant within 14 days of the deposit - or face punitive sanctions.  Case law seems, however, to be softening the impact of those sanctions. 

First we had cases allowing the landlord effectively to choose to default until he reached the doors of the court.

The recent case of Potts -v- Densley and Another indicates that the defaulting landlord can be successful even if the tenancy had come to an end before the deposit was protected, if he has managed to comply by the date of the hearing. 

Things have been moved on again by Gladehurst Properties Ltd v Hashemi, where the landlord never even tried to comply with the schemes but the tenant's claim against him failed in the Court of Appeal because that claim had not been made until after the tenancy had ended.   

A note of caution is, however, needed. These two cases are not consistent with each other in their reasoning, and it is likely that there will be other decisions which seek to rationalise the law, and possibly attempts made to rediscover the original intention, which was to protect tenants. What is more, the landlord was lucky in Potts - if the scheme provider had known that the tenancy had ended, it would not have allowed the deposit to be protected.

Best practice for landlords is to protect deposits in strict compliance with the legislation, within fourteen days of receipt, thereby avoiding the uncertainty and potential additional costs of late compliance. Sensible tenants should be enquiring of their landlord exactly what has happened to their deposit.    

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