Tenancy Deposits – Housing Act 2004

Recent case law shows that some Private Landlords remain unsure on their legal requirements relating to the protection of a private tenant’s tenancy deposit, paid as security of the tenant’s obligations arising from their Assured Shorthold Tenancy (AST) agreement. 

What does a Private Landlord need to do? 

s213 Housing Act 2004 sets out the statutory requirements as follows: 

• Any tenancy deposit paid in connection with an AST much be dealt with in accordance with an authorised scheme. 
• The deposit must be protected within 30 days from when the deposit is received. 
• Prescribed Information relating to the deposit must be given to the tenant within 30 days from when the deposit is received. 
• The initial requirements of the scheme must be complied with by the Private Landlord within 30 days of the deposit being received. 

What happens if a Private Landlord gets it wrong? 

s214 Housing Act 2004 states that a Court may order the person holding the deposit to pay back the deposit to the tenant, plus up to three times the amount of the deposit. 

s215 Housing Act 2004 states that no valid s21 Notice Seeking Possession can be given. 

The sanction at s215 can be remedied if the deposit has been returned to the tenant in full, or with such deductions as agreed before service of the s21 Notice Seeking Possession. 

The issue as to whether the deposit has been “returned” can be a tricky one. A Private Landlord cannot simply put cash through the door, send a cheque or deposit money into the tenant’s account unilaterally.  

The tenant needs to consent to the return of the deposit, or for example, for it to be set off against rent arrears. 

The recent unreported County Case of Gul v Bilal at the Stratford Hearing Centre on 18th October 2021 demonstrates this. In this case, the Landlord contended that the deposit had been returned when he attended the property in January 2020, with the tenant present, and simply left a cheque on the kitchen table for the amount of the deposit. 

Although the tenant agreed the cheque had been left, he had never accepted it, did not want the deposit to be returned, and had never cashed it.  

The deposit had not been returned and therefore a possible claim to rely on the s21 Notice Seeking Possession had no real prospect of success. 

This means you must always obtain the tenant’s express permission, even if by text message, for the deposit to be returned, or for it to be set off against monies owed, e.g., arrears. You need clear evidence that the deposit has been returned before service of a s21 Notice Seeking Possession.