Pursuant to section 213 of the Housing Act 2004 any deposit paid to a landlord in connection with the tenancy must be dealt with in accordance with an authorised tenancy deposit scheme.
Under the Housing Act 2004 landlords must protect the deposit received from tenants within 30 days from the date the deposit was received by the landlord. Simply protecting the deposit with an authorised scheme does not fully comply with the requirements set out in section 213 of the Housing Act 2004. In addition to protecting the deposit within 30 days of receipt, a landlord must also give the tenant certain information relating to the authorised scheme where the deposit is protected. The information about the authorised deposit scheme must confirm the landlord’s compliance with the requirements of the scheme.
The information the landlord gives to the tenant must also provide details about the operation of the authorised scheme and must be contained in the prescribed form or in a form ‘substantially’ similar to the prescribed form. Pursuant to section 213(6)(b) of the Housing Act 2004 the prescribed information that landlords must give to their tenants must be given to the tenant within 30 days from the date the deposit was received by the landlord.
Thus, the Housing Act 2004 requires landlords to protect any deposit received from their tenants and then give their tenants prescribed information about the operation of the deposit scheme. Both requirements must be completed within 30 days of receiving the deposit from the tenant.
Landlords who fail to comply with the requirements to protect as set out in section 213 of the Housing Act 2004 may be subject to legal proceedings. Where a court is satisfied that the landlord has not complied with the protection requirements, the court must order the person holding the deposit to return the deposit to the tenant. In addition to returning the deposit, the court must order the landlord to pay the tenant an amount of between one and three times the amount of the deposit as a penalty for failing to comply with the requirements to protect and give the tenant prescribed information within 30 days of receiving the deposit.
Further, section 215(1A) of the Housing Act 2004 prevents a landlord from giving a section 21 notice to their tenant if the landlord has not complied with the deposit protection requirements. If a landlord wishes to give a tenant a section 21 notice but has failed to protect the deposit and give the prescribed information to the tenant within 30 days, then the landlord may either return the deposit or protect the deposit and give the prescribed information to the tenant prior to giving the tenant the section 21 notice. Nonetheless, the tenant is still entitled to pursue the landlord for a monetary award for failing to comply with the requirements to protect the deposit within the 30-day limit.
If a landlord seeks possession of their property on the grounds of rent arrears but failed to comply with the requirements to protect the deposit, then the landlord may be subject to a counterclaim of up to three times the amount of deposit received. If the tenant is successful in their counterclaim, the monetary award to the tenant will be set off against the rent arrears claimed by the landlord. This is important because if the rent arrears are reduced below a certain level after the set off then the landlord may not be entitled to possession as a matter of law.