If you are a landlord who likes to sit back, relax and watch rental income flow into your bank accounts, beware! The law in relation to tenant deposits has changed. If you have taken a deposit from your tenants and you haven't protected it you could be in for a bumpy ride and a hefty fine.
As a landlord, you have until 23 June 2015 to protect any deposits that were taken before 6 April 2007 - 'old' deposits. If you fail to do this you could face a fine of three times the deposit and find it hard to get rid of any troublesome tenants.
Deposit protection legislation originally came into force in April 2007 to help deal with issues and disputes at the end of a tenancy. Landlords now have to protect all deposits in a government scheme within 30 days of receiving them. There are many schemes out there which can be used to protect a tenant's deposit, most of which are simple and cheap to use. These schemes include the Deposit Protection Service, MyDeposits or the Tenancy Deposit Scheme. All the schemes have different benefits and costs and are relatively painless to sign up to.
There will be a few landlords out there that have tenancies which have continued after the original agreement passed and may not be aware they now need to register the 'old' deposit; don't be one of them. These landlords who have created tenancies before 6 April 2007 and have not protected the deposits are the likely bunch to be caught out by the change in the law. These roll over agreements could potentially cause a landlord a severe headache and mean they have a little less pocket money to spend on ice-cream this summer. Under the new law landlords could face a fine calculated by multiplying the original 'old' deposit by three.
As a result of the change in the law a landlord cannot serve a Section 21 'Notice to Quit' on a tenant they may want out, if they have not protected the 'old' deposit. This is yet another reason to spark slumbering landlords into action.
Luckily, for worried landlords, there is a simple way to navigate these minefields. All you need to do is place the existing 'old' deposit into a protection scheme and then serve the 'prescribed information' on the tenant. 'Prescribed information' is just a legal term for all the information relating to the protection scheme the landlord is using to protect the deposit and a few other details about the deposit and the tenancy. It's a simple process and well worth taking if you want to continue to sleep easy.
There are some exemptions from the new rules on deposits, however these only apply to a few situations so don't think you will be safe if you don't act. These exceptions include live-in landlords, those with tenants paying £100,000 a year or more, corporate tenants and student accommodation offered directly by universities and all those specifically not included in the law.
So to put simply - if you have an 'old' pre 6 April 2007 deposit and it has not been protected, act now! Have the deposit protected before 23 June 2015 so you can enjoy your summer tanning and avoid turning too red in the face.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.