Anyone who lets out a property to a residential tenant will know that they must keep any deposit they receive on a Tenancy Deposit Scheme (TDS).This has been the case since April 2007. Landlords cannot get around the TDS requirements by describing a deposit as something else. As long as it is taken as security against the tenant’s liabilities, it will be a deposit.
On top of this, the landlord must supply the tenant with prescribed information within 30 days of receiving the deposit. This includes general information about the Scheme, and specific information about the deposit itself (such as the amount of the deposit, the landlord’s details and information about when the landlord can retain all or part of the deposit).
The penalties for non-compliance with these requirements are severe, as a Court can order the landlord to pay the tenant up to three times the amount of the deposit. These penalties apply even if the landlord subsequently complies with the requirements. This means that landlords can find themselves in situations in which the deposit has been returned to the tenant, but the tenant can still pursue them for up to three times the amount of the deposit.
It is clear that if landlords fail to comply with the requirements, then they will be liable for the penalties.
But what if an agent is acting for the landlord, and does not comply with the requirements?
The starting point is that if an agent receives a deposit without protecting it, it may be liable to pay the penalties itself. However, the tenant might decide to pursue the landlord instead (for example, if the agent has become insolvent). Even though the money is being held by the agent, the landlord may still be liable to pay the penalties. There are two reasons for this. Firstly, the agent is acting as the landlord’s agent, and secondly because the legislation provides that the landlord must be ordered to pay the fine.
In short, a landlord may have to pay for the consequences of his agent failing to comply with the TDS requirements. All the more reason, then, for landlords to use agents that they know and trust. If they are using an agent for the first time, it is a good idea to get them to confirm in writing that they have complied with the TDS requirements.