Tenancy issues - No Deposit Scheme, demanding deposit back

[llplug]

I am a private landlord who has not put tenants deposit into Deposit scheme - I now understand the errors of my ways, put my hand up, my fault, been lax

Tenant has had a number of minor issues (sink drainage, plug not working, bedroom light not working) which I have made an effort to rectify, often I have offered to go by and fix, but then they have said they are not available or sorted it out themselves - almost like they don’t want me to come by flat.

That aside tenant keeps mentioning the law, tenant has now demanded deposit back as I have not put into a deposit scheme, I said that I’m happy to put in a deposit scheme (to late now as its 2 months into tenancy), they are saying I cannot put moneys into scheme after 30 days and want it back asap. I have no problem returning the money, but feels like I have no leg to stand on if any damage etc when they leave tenancy. It appears I should return deposit within 14 days to not incur any legal actions etc.

I have now been notified by tenants that there is mould in bedroom, bathroom and have sent photos. There has never been much of a mould issue, but its now in quite a few areas, they are demanding I fix asap, I do believe they have not been ventilating property properly, offered to come round to investigate but told they are not available.

I’m now at the point where I’m happy to surrender tenancy as I clearly feel they are unhappy with flat, but they still seem intent on staying.

If anyone has any advice on returning deposit, problem tenants, legal rights by not have used a deposit scheme, can I somehow still join it?

[jpkeates]

There are two consequences of not protecting the deposit (which has been the law for about 16 years now).
The first is that the tenant can sue you for the return of their deposit, plus a penalty of up to three times the value of the deposit.
They can do that regardless of whether you return the deposit or not (for up to six years from when you were meant to have deposited it).

They can also elect to go to a company specialising in this kind of situation who will demand both the penalty and a large legal bill for their "costs" - which will be high.

The second consequence is that you can't use a section 21 notice unless you give the tenant their deposit back.

If you protect the deposit now it doesn't change either of the above, but might reduce a potential penalty (because it might look like you were trying to comply with the law but were just slow).
It would also give you and the tenant access to a dispute resolution process when the tenancy ends.

I am not sure what value keeping the deposit gives you to compensate for the risk of a higher penalty.

The parallel risks are that a) these tenants seem to know more about renting than you do about letting, and b) what else might you not have done?

[theartfullodger]

Return deposit plus some more - say another deposit + £1 or maybe 2xdeposit. Or run risk of a much bigger penalty & fees.

I'm in favour of tenants obeying laws, likewise agents, likewise landlords. Gosh I hope my agents are protecting deposit correctly....

[Hudson01]

I agree with the above (jpkeates), for the tenant to have investigated if you had put the deposit in the correct place speaks volumes, you may be in a bit of bother here.

[nukecad]

On the other point- significant mould only 2 months into a tenancy sounds like a bigger issue than tenant behaviour.

[KTC]

I said that I’m happy to put in a deposit scheme (to late now as its 2 months into tenancy), they are saying I cannot put moneys into scheme after 30 days and want it back asap.

If you protect the deposit now it doesn't change either of the above, but might reduce a potential penalty (because it might look like you were trying to comply with the law but were just slow).

As jpkeates said, you can put the deposit into a scheme now. It won't remove your liability to a penalty, but then it'll be protected for any SPT that may arise.

The tenant don't have an right to the return of the deposit right now, either normally under the tenancy agreement as the tenancy is not yet over, nor under deposit protection legislations. If they sue while the tenancy is ongoing, the court can order it protected or returned. While I think if it's already protected by the time it goes to court, then it must be returned. Practically however, by the time such a case gets to court, the fixed term's probably over so it's moot.

[theartfullodger]

Insist on using deposit scheme?? You are legally obliged to - or possible fines & invalid s21..

[L4NDLORD]

ergister it under a deposit scheme asap

[jpkeates]

Even if you don't renew, the tenancy will still continue until you (or the tenant) ends it.
Not renewing doesn't really have any effect.

[KTC]

Another question, once tenancy agreement, period has run its course, tenants may want to renew, I'd prefer they didn't. Sounds like refusing renewal will just cause issues? When drawing up new agreement/renewal will I be able/insist on using deposit scheme?

If when the fixed term ends and the tenant don't choose to leave by the last day, and there's no new fixed term replacing it, a stautory periodic tenancy will arise by automatic operation of law. That's entirely normal, I don't understand what "issues" you think there will be.

You can't insist on the tenant giving you a deposit again having returned it. Well, you can make it a condition of a new fixed term, but the tenant can just not agree. If you really wants to have a deposit, I don't understand why you are returning it. Offer to pay them a sum in full settlement for their claim against your deposit non-protection, or agreement to set off sum against future rent, and put the deposit in a scheme now. Whether you renew at the end of the fixed term or it goes statuory periodic, that's a new tenancy and the issue of returning the deposit or no s21 etc. goes away at that point.

[jpkeates]

Whether you renew at the end of the fixed term or it goes statuory periodic, that's a new tenancy and the issue of returning the deposit or no s21 etc. goes away at that point.

That's not my understanding (unless something has changed recentiy).

You can't serve a s21 notice when a deposit was received after a date in 2007 "at a time when" requirements of s213(3) Housing Act 2004 has not been complied with.
As 213(3) has a deadline to do something, that condition remains true once the non-compliance has happened once.
So a new tenancy with compliance can't correct that.

I've been wrong before (often), but the information I can find (quickly) seems to support that view, but it is all quite old (and Superstrikey), so there may have been something I have missed.

[KTC]

So a new tenancy, the deposit was deemed returned and received again and the requirements applies afresh, hence multiple penalties if non-compliance across multiple tenancies.

s215(1A) which is what you're quoting, and s215(2A) says

(1A) Subject to subsection (2A), if a tenancy deposit has been paid in connection with a shorthold tenancy on or after 6 April 2007, no section 21 notice may be given in relation to the tenancy at a time when section 213(3) has not been complied with in relation to the deposit.

(2A) Subsections (1), (1A) and (2) do not apply in a case where—
(a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant, or

Where we are in tenancy 2, whether a new fixed term or a SPT, tenancy 1 has ended. In such a case, the s21 notice that is served after T2 has started is in relation to T2 (and possibly any SPT arising from T2) and not T1 since that has already ended, AND the deposit has been returned to the tenant in full for T1 anyway.

The only bearing on what happens during T1 has is if the landlord protect the deposit and/or serve the PI late and the deposit then remains protected under the same scheme when T2 starts, deemed compliance under s215B would apply so they are in compliance with s213(3) as soon as the replacement tenancy started. That's additionally helping the landlord not tenant.

[jpkeates]

This is an older article, but I think it's still relevant.
https://landlordlawblog.co.uk/2013/0...ection-issues/

Section 21 notices aren't associated with a specific tenancy, so what (presumably) matters is the situation when the notice is served.

And, while Superstrike decided that a landlord received a deposit again when the new periodic tenancy began, I don't think that it also decided that it had been returned to the tenant in full.

You might think that, logically, that has to have happened, in order for it to be received again, but, as Superstrike never made logical sense anyway, I think that may be a stretch.

[KTC]

I don't understand/agree that a section 21 notice isn't "associated with a specific tenancy". An existing s21 notice is invalidated by the granting/agreement of a new tenancy between the landlord and tenant. s21(2) of the Housing Act 1988 are there specifically to provide an exception to allow a s21(1) notice to roll over to apply to a SPT.

Paragraph 38 of Superstrike judgment explicitly says "the tenant should be treated as having paid the amount of the deposit to the landlord in respect of the new tenancy, by way of set-off against the landlord's obligation to account to the tenant for the deposit in respect of the previous tenancy". Whether you summarise that as the landlord deemed to have returned the deposit in full, or go with "with such deductions as are agreed between the landlord and tenant", the effect is still the same.

Further, s215B of the Housing Act 2004 (deemed compliance) subsection (1)(b) - "(ignoring any requirement to take particular steps within any specified period)" - would make absolutely no sense otherwise. It explicitly allow for deemed compliance in a replacement tenancy even if the initial requirements was not compiled with on time. If the landlord must return the deposit or wait for the tenant to sue, there would be no point to allow them deemed compliance in a future replacement tenancy.

I cannot agree with Tessa post there. That was from a couple of months after Superstrike and long before Deregulation Act. I don't know if her views have changed since then. I don't see how one can logically go from new tenancy, all the obligations applies afresh with new additional penalty for non-compliance, but somehow the sanction from the previous tenancy continues even though the tenancy has eneded.

[KTC]

If you follow Nearly Legal s21 flowchart, the logic correspond to my views.

Start at page 13 - is this the first tenancy agreement, if so within 30 days, if not was it protected in a previous tenancy with no limitation on dates.