The Deposit That Was Never Protected
You have just taken over management of a two-bedroom flat from another agent. The tenancy started 14 months ago with a deposit of £1,800. The tenant is on a 12-month AST that has rolled into a periodic tenancy. On reviewing the file you find no deposit protection certificate, no prescribed information, and no record of which scheme was used. The former agent says the deposit was 'held by the landlord'. The landlord confirms he has the money in his personal account and did not know he had to protect it. The tenant has given notice to leave in two months and has mentioned 'looking into my rights' about the deposit.
1. Explain the legal position on the deposit and the risks to the landlord.
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Where a tenancy deposit is taken for an AST in England, the landlord must protect it in a government-approved scheme within 30 days of receipt and give the tenant the prescribed information within the same period. The deposit here was taken 14 months ago and has not been protected, so the landlord is in breach.
Risks to the landlord:
- The tenant can apply to the county court for the deposit to be returned and for compensation of between one and three times the deposit amount.
- The landlord cannot serve a valid section 21 notice while the deposit is unprotected and the prescribed information has not been given.
- The local authority can impose a financial penalty of up to £30,000 for failure to protect.
- The former agent may also face a claim if they advised or handled the deposit.
The landlord should protect the deposit now, but late protection does not remove the liability for the period of non-protection.
2. What should you do now, and how should you handle the tenant's 'looking into my rights' comment?
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Act promptly:
- Advise the landlord in writing to protect the deposit in an approved scheme immediately and to serve the prescribed information.
- Confirm which scheme is used and obtain the certificate.
- Record the date protection is achieved, because the 30-day period has long passed.
- Do not attempt to negotiate the tenant away from their rights or discourage them from seeking advice; that could amount to a breach of the agent's obligations and damage the landlord's position.
On the tenant's comment:
- Respond factually: confirm the deposit will be protected and the prescribed information provided.
- Do not admit liability on the landlord's behalf without instructions, but do not mislead the tenant.
- Keep a record of the exchange.
- If the tenant makes a court application, the landlord should take legal advice; the agent should cooperate with disclosure.
3. The tenant leaves in two months. What is the correct process for returning the deposit, and what could go wrong?
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Process:
- Inspect the property against the check-in inventory and schedule of condition, with the tenant present or invited.
- Agree deductions in writing with the tenant, with receipts or quotes for any work.
- If the scheme is a custodial scheme, apply for release; if insurance-backed, return the agreed amount and use the scheme's dispute resolution for any disputed amount.
- Return the balance promptly, normally within 10 days of agreeing the amount.
What could go wrong:
- Deductions without evidence will be challenged and may fail in dispute resolution.
- If the deposit was only protected late, the tenant may still pursue the one-to-three-times penalty.
- If the deposit is not protected at all by the time of return, the landlord remains exposed.
- Poor inventory records make it hard to justify deductions.
- Failing to give the prescribed information may invalidate any section 21 route if the landlord later needs possession.