What Happens if My Landlord Hasn’t Protected My Tenancy Deposit?

Renting comes with many legal obligations for both the tenants and the landlord to uphold. Whilst the tenancy agreement is legally binding and property owners are dependent on the referencing process to avoid problem tenants, they are not exempt from neglect themselves.  Whilst a tenant can easily feel somewhat powerless in these situations there are steps they can take is their landlord hasn’t protected their tenancy deposit.

What Is a Tenancy Deposit?

Naturally, with tenants having to pay for two deposits close to the start of their tenancy period, for first time renters there can be some confusion regarding which deposit needs to be protected, why they are paying these amounts to the landlord and if they will have these amounts returned in full.

It is essential for first time renters to note that the tenancy deposit, sometimes called a security deposit, is entirely separate to the holding deposit and functions far differently. Whilst the holding deposit is intended to take a rental opportunity off the market, in effect ‘reserving’ the property for the interested party, the security deposit is far more of a safeguarding measure for the landlord.  Additionally, whilst tenants can expect to have their holding deposit returned to them rather quickly, often being deducted from their initial rental payment, the sane cannot be said in regards to the tenancy deposit, which can be retuned at the close of the rental period, however there is no guarantee the full amount will be paid back to the tenant, but more on this later.

Simply put, the security deposit that is requested from the tenant is a way in which landlords are able to offset the costs of replacing or repairing any aspects of the property that have been damaged by the tenant. Landlords are only able to make these deductions in the cases where the contents or structure of the rental was damaged through neglect, anti-social behaviour or malicious actions, with allowances being made for “fair wear and tear”. This wear and tear encompasses the expected degradation of an appliance, furnishing or contents within the rental property that has succumb to frequent use over multiple tenancies.

Whilst making the residents of the rental property more accountable for remedial work is synonymous with the tenancy deposit, it is not its exclusive application by the landlord as they are also able to claim any rent arrears accumulated by the tenant from this amount. However, this is only practical if the amount the tenant has accrued in rent arrears is no more than the amount taken for the deposit, and the end of the rental period is in sight, as neither party of the rental agreement will have access to these finds until the fixed term has ended.

With this being said tenants should not be cautious of this as the conditions under which any deductions from the tenancy deposit can be made will be clearly outlined in the tenancy agreement; with another common deduction being made for the cleaning of the rental at the close of the fixed term.  

What Is a Deposit Protection Scheme?

When the landlord requests a tenancy deposit from their tenants this must be placed into one of two different types of tenancy deposit protection schemes. For the tenant the difference can be negligible; however for the landlord the major difference is if they will physically be physically safeguarding the amount throughout the duration of the tenancy.

If the tenancy deposit is entered into an insurance based protection scheme, the landlord will be held liable for retaining the full amount taken from the tenants. With this being said, if at the end of the fixed period a dispute were to arise over any deductions being made from the retuned amount, the full deposit must be handed over to the schemes resolution service until a resolution is reached.

However, if the landlord chooses to enter the tenancy deposit into a custodial based scheme, the approved protection service will instead hold onto the amount requested from the tenant. Once the fixed period expires the scheme will return the appropriate amounts with deductions for the landlord being taken into account if necessary.

Can I Sue My Landlord for Not Protecting My Tenancy Deposit?

Section 213 of the 2004 housing act dictates that a landlord must enter a tenant’s tenancy deposit into a government approved deposit protection scheme within 30 days of the payment being made to the landlord. Providing that the landlord has neglected to enter the tenant’s deposit into an approved deposit protection scheme, the tenant could be awarded significant compensation if their case is successful.  It is also worth noting that if a landlord has protected the deposit late, they could still be subject to the same repercussions, however the severity of the landlords failure to comply is taken into account on an individual case by case basis.  If the courts find the landlord to have failed their duty to protect the deposit they could be ordered to pay the effected tenants up to three times the amount taken for the original tenancy deposit, making this a very costly mistake for rental property owners.

Before the matter is taken to court the tenant must attempt to resolve the matter with the landlord directly. It is recommended to do this in writing as a verbal conversation is harder to document and will be relied upon if the matter progresses to court.  This correspondence should clearly detail that the owner of the rental property has failed to comply with the regulations of the tenancy deposit protection scheme, alongside explaining that if the full amount is not returned they will be taken to court, a case that could result in them paying you up to three times the amount originally taken. Whilst this should be enough to make most landlords immediately resolve the matter with their tenant, but if the landlord fails to respond within 21 days the case can be taken to court.

From here it is essential that the tenant begins to gather evidence to support their claim that the landlord has neglected to protect the tenancy deposit. This is far simpler than you could expect as there are only three schemes that the landlord would be able to enter the amount into for protection. If after contacting all of the government approved schemes none have returned with details of your landlord taking action to protect the tenancy deposit, this will act as confirmation of the landlord’s neglect.

When taking their landlord to court the tenant will be required to complete a form stating that they wish to enter a claim against the property owner under S213-214 of the Housing Act 2004. This is the tenant’s opportunity to outline the situation for the courts, allowing them to detail when the deposit was paid, how much was taken and when the landlord was contacted to return the full amount. Alongside this the tenant should provide the courts with a copy of their tenancy agreement, correspondence between themselves and the landlord regarding the deposit, and any receipt they received when giving the landlord the security deposit. This information will of course be taken into account when the hearing takes place.

If the court rules in favour of the tenant and find that the landlord has failed to act in accordance with current regulations the landlord is likely to be ordered to pay back the full deposit amount to the tenant within two weeks, or enter the amount into an approved protection scheme within this same timeframe.  As previously mentioned the courts can also award the tenant with interest and compensation of up to three times the amount taken for the tenancy deposit.

How Long Does a Landlord Have to Protect My Deposit?

Whilst a rental property owner is under no legal obligation to take a tenancy deposit from the residents of their accommodation, if they do they are legally bound to entire the full amount into a government approved deposit protection scheme. Once the tenant has paid the tenancy deposit to the landlord, they will have 30 day in which to enter the amount into an authorised deposit protection scheme. Within this same time frame the landlord is also obligated to provide the tenant with information regarding the scheme under which the deposit is protected.  This documentation must inform the tenant of the amount taken for the security deposit, confirm the address of the appropriate rental property, what deductions could be made from the provided amount at the end of the tenancy, details on how the scheme will be able to support the involved parties during a dispute over any deductions and where to turn in the landlord neglects to contact the tenant at the close of the fixed period. This 30 day time frame is maintained if the landlord chooses to renew a tenancy with a previous occupant, with updated information being provided.

What Is a Reasonable Security Deposit?

After coming into effect on the 1st June 2019, the tenant fees act was a move by the UK government to combat the amount of unfair and blatantly unlawful charges a renter could incur whilst trying to move into a new home. The initiative is intended to uphold a level of transparency throughout the rental sector allowing tenants to easily evaluate the financial obligation that would come with a potential rental opportunity, saving them the upset of hidden costs later down the line.

Whilst the act was originally condemned by some landlords, as these letting fees would often allow them to offset the high costs that come with the referencing process and advertising their rental property with an online letting agent. However, much to the delight of tenants the Tenant fees Act has greatly reduced the financial hurdles renters had to navigate before moving into a property. Upon initial inspection that may seem like a blow to landlords that could be seen as merely protecting their investment and financial standings, something essential when managing a property portfolio; however, by making it easier for renters to access future renting opportunities landlords will have a greater pool of prospective tenants to choose from, reducing their exposure to void periods.

With this being said, the Tenant Fees Act placed a limit on the amount a landlord can request from their tenants. The cap that dictates the maximum amount allowed for a tenancy deposit is dictated by the amount a landlords sets their rent at for the property. If the landlord charges the occupants of the rental property up to £50,000 each year in rent they will be able to request up to the equivalent value of five weeks rent from the occupants. However, if the annual charge for rent is above this amount, the landlord will be permitted to request up to six weeks rent for the deposit.

If your landlord fails to abide by the regulations established by the Tenant Fees Act then they will not only be unable to effectively serve a section 21 notice to reclaim possession of their property at the end of the fixed term, but they will also receive a court order forcing them to repay any wrongfully taken amounts with potential interest being awarded to the effected tenants.

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