Warning for Landlords Over Deposits

As claims for incorrectly handled property rental deposits soar, landlords are being warned to ensure they, or their agents, are complying with the legal requirements if they want to avoid high penalties.

According to recent figures released from insurers, the number of matters relating to property rental deposits peaked at 25% of all professional indemnity claims made by estate and letting agents in the first quarter of this year, up from just 3% last year*. The claims most often relate to a landlord lodging a deposit late or failing to provide the correct information to the tenant about the terms and the deposit scheme used.

Under the Housing Act 2004, any deposit must be held by the landlord in a registered deposit protection scheme and the tenant must be given specific details of the deposit protection scheme used, how the scheme works, and information including amounts, contact details and dispute procedures, all within 30 days.

If a court rules that a landlord has failed in their duty, it can impose fines of up to three times the value of the deposit, which must be paid within 14 days of the court order.

‘It’s the landlord who will find themselves subject to the county court order,’ explains Jeremy Paterson, a property litigation solicitor at Verisona Law: ‘They may be able to bring a claim against any letting agent involved, who in turn will claim on their professional indemnity insurance, but it’s a costly business and bad in reputational terms for all concerned.’

‘The legislation has been in place for a long time, but we see both agents and landlords still getting it wrong. Where landlords have a big property portfolio, they are more likely to have the right processes in place. For small-scale landlords, or the accidental ones who may have ended up renting out their home while working elsewhere, it’s worth adopting some of the practices of bigger portfolio owners, as it’s no defence to say you didn’t know or had left it to your agent.’

Paterson advises taking some time to understand the law for landlords and having checklists for each stage of the tenancy. ‘You need to make sure they are used each time, whether you are doing it yourself or checking your agency have acted properly on your behalf. In the worst-case scenario, if you haven’t used a deposit scheme when you should have, the court can rule that a tenant does not have to leave the property when the tenancy ends.’

Jeremy Paterson is a Senior Associate Solicitor in the Dispute Resolution team, he can be contacted on 023 9231 2085 or jeremy.paterson@verisonalaw.com.

*Claims data compiled by DAC Beachcroft


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