Deregulation Bill 2015: Important Changes to Tenancy Deposit Schemes

Tenancy Deposit Schemes (TDSs) were created under the Housing Act 2004 (HA 2004), pursuant to which it became compulsory for all landlords of residential assured shorthold tenancies (ASTs) created on or after 6 April 2007 to protect their tenants’ deposits in an approved TDS and to provide certain prescribed information to the tenant within 30 days of receipt of the deposit.  Failure to comply means that the landlord is unable to serve a valid Section 21 Notice to bring the tenancy to an end and, if the tenant takes action, could leave the landlord liable for a financial penalty of up to 3 times the value of the deposit.

The Deregulation Act 2015 (DA 2015) gained Royal Assent and came into force on 26 March 2015. Sections 30-32 of the DA2015 aim to rectify flaws in the tenancy deposit protection regulation contained in the HA 2004 and to clarify ambiguities created by recent case law.

What ASTs will the changes impact?

1. Where deposits were taken in respect of a fixed term AST before 6 April 2007 which then became a statutory periodic tenancy after 6 April 2007.

The DA 2015 has inserted section 215A into the HA 2004 to deal with these tenancies.  Where the landlord has never protected these deposits, the deposit must now be protected and the prescribed information served in accordance with section 213 HA 2004.  The DA 2015 allows for a grace period of 90 days for compliance from the date of Royal Assent, meaning the deadline for compliance expires on 23 June 2015.

2. Where deposits were taken in respect of a fixed term AST before 6 April 2007, which became a periodic tenancy before that date.

Section 215A also deals with these tenancies (which may few and far between) and requires landlords to protect these deposits within the grace period, however, there will be no financial penalty for failure to do so.

In respect of both 1 and 2 above, if the Landlord fails to comply they will be unable to serve a Section 21 Notice to bring the tenancy to an end without first returning the deposit to the tenant.

3. Where deposits were taken in respect of a fixed term AST on or after 6 April 2007 and protected in a TDS for which the prescribed information was served at the time, which then became a statutory periodic tenancy after 6 April 2007 without further prescribed information being served.

The DA 2015 has inserted section 215B of the HA 2004 to deal with these tenancies. The landlord’s compliance with the TDS legislation in respect of the original AST will suffice for the purposes of the statutory periodic tenancy and they will not need to take further action. However, these provisions do not apply to landlords who failed to protect the deposit during the original AST.

4. Prescribed information

Section 30 DA 2015 has amended the Prescribed Information Order 2007.  Agent’s details can now be given in place of the landlord’s where the agent has protected or is dealing with the deposit.

Comment

The changes will take effect immediately. Landlords must ensure that they have complied with the TDS requirements and those affected by the changes will need to act swiftly to ensure that any deposits take before 6 April 2007 have been protected by 23 June 2015.

Fixed Charge or LPA Receivers dealing with any historic ASTs should also be mindful to check that the new requirements regarding deposits have been met.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

 

For further information, please contact Kenny Friday at or Edward Vaughan at