The warning was sounded by the Association of Residential Letting Agents (ARLA). It said most at risk were landlords who granted tenancies before 6 April 2007 when the use of government-backed deposit protection schemes had not been introduced.
According to the Deregulation Act 2015, landlords who collected deposits from tenants pre-April 2007 and have since renewed the contract or those which become ‘statutory periodic’ must move the deposit to an approved scheme. A tenancy agreement becomes statutory periodic if the fixed term elapses and the contract is allowed to roll on, on a monthly or weekly basis.
The penalty for not complying with the law by the June deadline could cost the landlord up to three times the amount of the deposit in compensation payable to the tenant.They may also find they are unable to terminate the tenancy using a Section 21 notice.
Confusion had surrounded deposit schemes after a precedent was set in a Court of Appeal judgement. In the case of Superstrike v Rodrigues the judge ruled any tenancy which began before 6 April 2007 which was renewed or became a statutory periodic after that date was a classed as a new tenancy.
Because of this the judge ruled deposits would have to be reprotected. ARLA said the ruling meant that landlords became at risk of not lawfully protecting their tenants’ deposits. ARLA said it was pleased to see the matter clarified in law and a deadline set to implement the changes.
David Cox, managing director of ARLA, said: “ARLA is pleased a legislative solution to a loophole in tenancy law, that plagued the industry for two years, has finally been addressed through the Deregulation Act 2015.
“Landlords have until 23 June 2015 to comply with this new provision and we urge all agents to check whether their existing tenancy agreements will be affected and to act accordingly.”
The government-backed tenancy deposit schemes are Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme. Details can be found on the government website.
