The Localism Act: Long awaited clarity in deposit protection law

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Prof Martin PartingtonThe Localism Bill became the Localism Act on 15 November 2011. In all the exciting stuff about the transfer of powers from central to local government, there is one section – 184 – which is of direct interest to all of us involved in the operation of the Tenancy Deposit schemes.

Perhaps not surprisingly, following the introduction of the schemes in 2007, a number of issues were taken to the courts which ended in decisions that ran against what the schemes were trying to achieve. Section 184 of the Localism Act amends the tenancy deposit provisions in the Housing Act 2004 to fix those problems.

They are all pretty nitty-gritty issues but it is important that members are aware of the changes.

Time limits. The first change relates to the time limits within which a landlord must meet the requirements of the legislation. The requirements are: (a) to protect the deposit and (b) to give prescribed information – e.g. about what scheme the landlord is using – to the tenant. The original time limit was 14 days. The Act states that the time limit is extended to 30 days. Agents must be clear about this importance of ensuring landlords meet these deadlines.

Penalties. Second, the Act makes it clear that failure to meet these deadlines will trigger penalties. (A court ruling under the original provisions had ruled that so long as the deposit requirements were met by the time any case came to court, there would be no penalty.) This is an important change which agents need to keep in mind and tell their landlord clients about. The Act introduces two changes:

  1. The amount of the penalty. Under the original scheme, a landlord who failed to meet the deadlines could be required by a court to pay a cash sum to the tenant of three times the amount of the deposit. It was the rigidity of this rule that encouraged the courts to take a very strict interpretation of the original legal provisions. Now the courts will have a discretion to make an award of between one and three times the amount of the deposit. Thus a landlord in flagrant breach of the rules will suffer more than one who has made a simple mistake.
  2. Possession proceedings. The original Act provided that where a landlord was in breach of the time limits, the use of section 21 notices – which gives an automatic right to the landlord to regain possession through the courts – would not be available. The Localism Act makes clear that, even if the time limit rules were not met, then so long as the original mistake is rectified, the use of section 21 notices will be possible. Thus the landlord will no longer be exposed to the double jeopardy of having both to pay money to the tenant and have much greater difficulty getting a possession order from the court.

Although the Localism Act is now on the statute books, it is not yet in force. We will obviously let you know when these changes come into force. But you need to think whether your procedures – in particular the info you give your landlord clients – needs amendment to reflect these changes.

Prof. Martin Partington CBE; Chairman, TDS

The Tenancy Deposit Scheme has published a guidance document on the Localism Act 2011 and what it means for members. Click here to download

You can read the full text of the Localism Act 2011 on the website of the UK Parliament - click here


Posted by Prof Martin Partington, Chairman TDS on 1 December 2011

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