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Agony Agent is here to help!

2nd December 2017

Q:  My tenant signed an agreement for six months, and paid a two month deposit.  However, I forgot to register the deposit.  He then signed another agreement for 12 months, but then changed his mind and served notice to vacate.  In that notice, he asks for me to use the deposit to pay for the last two months.  He now wants to claim back the deposit plus council tax as otherwise his solicitor will take me to court for 3 times the deposit.  Would you please advise me in this matter?

A:  I’m afraid I have bad news for you; not protecting the deposit makes you liable for the penalty for noncompliance with the regulations.  Under the Housing Act 2004, a judge has to make an order for the penalty payment if the tenant applies to the court requesting this, if you have failed to protect the deposit within the 30 day period.  The thing which triggers the liability for the penalty is failing to protect a deposit within 30 days of payment.  Even if the deposit ‘did not exist’ at a later date, this does not cancel your liability.  As soon as the 30th day after the deposit payment has passed, you are liable to having the order to pay the penalty made against you – there is NOTHING you can do to change this.  NO exceptions.

The judge does not have the legal power to refuse to order the penalty, all she or he can do is decide whether the penalty should be 1, 2 or 3 x the deposit sum.  Many landlords find this hard to accept, but that is the law and there are no exceptions.

It may get worse in your scenario, as if the deposit carried over to the second fixed term it is possible that the tenant may be entitled to TWO awards, if you did not protect the deposit within 30 days of the start of the second tenancy and serve the prescribed information.  This may make you liable for up to six times the deposit sum, however, this would be at the discretion of the judge.

The Act also says that the judge should order the landlord to refund the deposit money (or pay it into a scheme), but if you can prove that the deposit was offset against the arrears with the tenant’s consent, this should not apply to you.  However, in the circumstances, it may be best to let this tenant go as he wishes, and make sure that all deposits taken in future are protected promptly within the time limit.

If you had a Non-Housing Act tenancy, you would not have a requirement to protect the deposit, but you may wish to anyway, so you can sleep tight should any change come into effect in the distant future.

For further advice on such matters please feel free to get in touch.

Richard Bond

Lettings Manager

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