A landlord who receives a deposit from a tenant in respect of an assured shorthold tenancy (AST) is obliged to protect the tenant’s deposit using one of three government-approved deposit protection schemes. A landlord who fails to protect the tenant’s deposit, or who does not provide the tenant with information regarding the scheme used to protect the deposit, can be liable to pay a penalty of up to three times the amount of the deposit. The requirement to protect tenants’ deposits applies in respect of all ASTs that commenced on or after 6 April 2007.
Recently, the courts ruled that a landlord who had initially failed to protect a tenant’s deposit, but had rectified the situation by the time the case was heard, could not be subject to a penalty for non-compliance. This surprising decision may have led landlords to believe that the requirement to comply with the rules regarding tenants’ deposits may be safely ignored unless and until action is taken by the tenant.
Since then, however, the High Court has ruled that a landlord who failed to provide a tenant with the information required under the scheme was required to pay the full penalty of three times the deposit. In this case, the AST had ended and the deposit had been returned to the tenant by the time the case was heard.