It is more than two years since the Tenancy Deposit Regulations came into force and there is no published government data to say whether these new regulations have been a success or not. Landlords continue to suffer tenants who do not pay the last months rent because they do not expect to recover their initial deposit which means that landlords are often left to pay for any damage caused to the property out of their own pockets. Tenants continue to complain that deposits paid over are either not being protected or they are not given the required information about where their deposit is being held.

Statistics published last year make interesting reading and bear out the fact that it appears to be a mixed story. There are 2.4 million tenancies in the UK and of those about 80% of landlords take deposits totalling some 1.2 billion but only 40% of deposits taken are  protected.

The penalties for a landlord who does not comply with the requirements of the regulations are severe.  If a claim is commenced by the tenant then the Court must order the landlord to re-pay the deposit and to pay a sum of money three times the amount of the original deposit plus costs.  

Landlords can choose to avoid the stricture of the regulations altogether by not taking a deposit at all, but there is a risk that they will be out of pocket at the end of the tenancy.  We have experience of cases where landlords take deposits but do not protect them either through ignorance or deliberately but do not suffer the penalties imposed by the Act because there is no central monitoring system.  The system is reliant on individual tenants being aware of their rights and being sufficiently motivated to make a claim against their landlord for recovery of their deposit. Tenants who are aware of the Courts mandatory obligation to order a landlord to pay a sum amounting to three times the initial deposit are more likely to make a claim and thus recover a windfall gain. Many more tenants only complain when they find themselves out of pocket at the end of the tenancy when their landlord fails to return their deposit.

Recent claims in the County Court make interesting reading.  The individual facts and details vary but there are some general points which have arisen in these cases.

• Landlords need to ensure that they both protect the deposit and comply with the Statutory Regulations providing that they must give information to the tenant concerning the whereabouts of the deposit.

• It is sufficient for a landlord to serve the Prescribed Information prior to a Court hearing even if it has not been done previously. It is not however sufficient to protect the deposit once proceedings have been commenced by the tenant for the return of that deposit.

• The court has no discretion in relation to the requirement to pay a tenant 3 times the amount of the original deposit.

• It is unwise for landlords to disguise the deposit as an advance payment of rent, if it is found to be a deposit in fact that would put the landlord in breach of his obligations.

• Tenancies which commenced prior to 6 April 2007 do not have to have the deposit protected where they subsequently continue as a periodic tenancy but the renewal of such a tenancy would be caught by the requirement to protect the deposit.

• Section 21 Notices will not be valid until the Regulations have been complied with both in respect to the protection of the deposit and the information to be provided to the tenant.

What about those whose deposits have been protected but the landlord and tenant cannot agree as to what amount is to be returned at the end of the term? Each Deposit Scheme has its own scheme of arbitration and The Tenancy Deposit Scheme (one of the three Government approved providers) said in its annual report last year that it had a greater number of disputes and was now employing more arbitrators to deal with those disputes.