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Legal advice: tenants win deposit refund

Landlords are obligated to protect tenancy deposits with an authorised scheme within 30 days of receiving them. Here’s how a late deposit registration led to tenant compensation.

In March 2019, Addie North’s son and his friends found a property they wanted to move into together through Leaders estate agents. The agent charged each of them a £405.60 deposit to secure the property.

At the end of the tenancy, Leaders withheld £350 from the group for council tax and cleaning charges. This was contested with the Tenancy Deposit Scheme (TDS). However, the TDS only awarded them £75 of the disputed deposit.

At this point, Addie consulted Which? Legal, and we identified that the initial deposit had not been registered within the required time.

Housing Act 2004

Under s.213 of the Housing Act 2004, landlords are obligated to protect tenancy deposits with an authorised scheme within 30 days of receiving it.

If a landlord fails to meet this, they would be liable to return the full deposit to the tenants and they may be liable for compensation. We advised Addie to send a formal complaint to Leaders, referencing the late registration of the deposit and her son’s right to compensation.

Addie’s son received an offer for £405.60, which he accepted. Michael Cook, group managing director at Leaders Romans Group, said:

“We are aware of an isolated filing error… which caused a delay to the deposit protection being processed. We apologise for the inconvenience caused. We take protecting our tenants’ deposits very seriously and we have systems in place to prevent such an error occurring again.”

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Comments

Purely out of interest, was the charge for council tax not valid and did the premises not need cleaning?

I applaud the managing agents for accepting responsibility for their oversight and making a full refund of the deposit.

From what we have been told by Jacob: “If a landlord fails to meet this, they would be liable to return the full deposit to the tenants and they may be liable for compensation.”

I wonder how many other tenants have lost money due to similar oversights.

I presume the letting agent was not the landlord, thus not them self liable for the return of the deposit under the tenancy deposit scheme, so it spared the tenant from having to contact or sue the landlord. Maybe the distinction is immaterial in practice.

It is not stated whether termination of the tenancy was at the request of the students or by notice given by the landlord.

The article doesn’t state how late the deposit was registered under the tenancy deposit scheme and what gave rise to the claim for failure to register within thirty days of commencement of the tenancy. The tenants would have known by around five weeks after commencement that the deposit was not protected since they would not have received the required information on how their deposit had been protected. Obviously, breach of the law is wrong but unless there was some sort of dispute with the landlord it would not normally come to light.

It is not clear from the information given what financial loss the tenants suffered in this case. They might still be liable for the council tax and have not had to pay for cleaning the property when the tenancy was terminated [which might have been the bone of contention].

I wondered whether this point in the scheme prompted the settlement “The court may decide that you won’t have to leave the property when the tenancy ends if your landlord hasn’t used a TDP scheme when they should have”.

The message from this case is that tenants must look out for themselves to make sure their deposit has been protected.

”…….. tenants must look out for themselves …….”. There seems to be a view held by some that many people are not capable, in general, of doing that. 🙁

I suppose the same advice is necessary for landlords. I wonder how many check that their letting agent has actually placed the deposit in a tenancy deposit protection scheme and discover belatedly that they have become liable for refund of the deposit plus compensation. Presumably the contract they have with the agent makes that function the essence of the contract and enables them to recover any consequential loss from the commission retained by the letting agent.

So in reality Which found a loophole for the tenants to get out of their obligations to pay outstanding council tax and to leave the property in the same sort of cleanliness as when they moved in, the same tactics as “Mr Loophole” used to get “famous” people off motoring offences. Lawfully correct…. but morally reprehensible.

Ade says:
23 June 2022

As reps of the landlord, what the letting agent as did was to take advantage of the inexperience of the students in dealing with landlords and agents and also students were now aware of the law regarding the deposit – all they wanted to do was to live together. As someone on a forum of landlords and student-tenants, there have been many complaints from students about letting agents being disingenuous, but students haven’t known where to turn. For example agents are meant to give incoming tenants some sort of leaflet which explains their rights to them however, most times this is not done. In this case, there was a savvy mother who stepped in to help her son by asking for help from Which? Otherwise the letting agents would have gotten away with yet another malpractice.