Tenant deposits: protection or a liability?

22 November, 2012

Residential landlords nearly always require deposits from assured shorthold tenants to provide some protection against tenant breaches. However, unwary landlords could end up having to return the deposit and pay three times the deposit amount to the tenant, not as a result of unjustly refusing to return the deposit or behaving unconscionably, but due to a failure to provide certain information to the tenant.

Since 2007 it has been compulsory for landlords to deal with a tenant’s deposit in accordance with one of the government’s three authorised tenancy deposit schemes. As well as ensuring the deposit is registered with one of the schemes, the landlord must provide certain prescribed information to the tenant about the scheme within 30 days of receipt.

The courts take these obligations very seriously. In the recent case of Ayannuga v Swindells the landlord protected the tenant’s deposit of £950 within the correct timeframe and provided some information to the tenant about the scheme. It was not enough. The court ordered the landlord to repay the deposit and an amount equal to three times the deposit as compensation to the tenant for the landlord’s failure to provide certain elements of the prescribed information. The landlord’s argument that the tenant suffered no prejudice and could easily have rung the deposit scheme to find out the extra details held no sway. The landlord consequently gained nothing from obtaining the deposit; it cost him £2,850 instead.