As many of you will be aware, the tenancy deposit regulations which came into force in 2007 turned out to be a bit of a mess, after the Court of Appeal had finished with them.

As a result the government decided to use the Localism Bill to tweak them to make the work they way they were originally intended. The Localism Bill is now the Localism Act 2011 and it is believed that the new rules will come into force in April 2012.

Here is a short summary.

When the deposit is received

Here landlords must protect the deposit within 30 days (unlike the 14 day period at present) and serve the a notice giving the prescribed information.

As you will no doubt be aware, the deposit can be protected with one of the following:

• The Deposit Protection Service www.depositprotection.com
• My Deposits www.mydeposits.co.uk
• The Dispute Service www.thedisputeservice.co.uk

You will find a notice regarding the prescribed information on the Deposit Protection Service website here. There is also one available on the Landlord Law site for members.

If the deposit is not protected AND/OR the prescribed information not given

The tenant will be able to bring a claim in the County Court, immediately after the end of the 30 day period. The landlord (and/or agent) will not have any defence to this. The court will order:

• Either the return of the deposit or
• For it to be protected with the Deposit Protection Service, and
• A penalty which will not be less than the deposit sum and not more than three times the deposit sum, the precise amount to be decided by the Judge.

If the tenancy has in fact ended, the Judge 'may' then require the deposit to be repaid but the implication is that if there is damage, the landlord may be able to ask that this be offset. We will have to see how this works out in practice. The variable penalty of between one and three times the deposit amount will still be payable, depending on how much the Judge considers appropriate.

Section 21 notices

These will be invalid if they are served before the deposit has been protected and/or the prescribed information notice served.

If the landlord fails to do this within the 30 day period, then before a section 21 notice can be served, the landlord must either return the deposit to the tenant or return it less agreed deductions (or offset it completely eg against rent arrears) with the consent of the tenant.

So if the tenant refuses to agree to anything the landlord will probably have to pay the unprotected deposit back before he can use section 21 (and have proof that he has done this).

A landlord can also serve the section 21 notice after a tenant has brought a section 214 claim to the court regarding the failure to the protect the deposit and this claim has been resolved one way or another.

Conclusion

These new rules correct the sloppy draftsmanship in the original legislation which have caused all the problems, and presumably the scheme will now operate as originally intended.

It is important therefore that landlords make sure that ALL their deposits are protected in future, to prevent claims from tenants and problems with section 21 notices.

Tessa Shepperson

Tessa is a solicitor and author, specialising in residential landlord and tenant law. She runs the popular online service www.landlordlaw.co.uk and writes a respected blog at www.landlordlawblog.co.uk.