Deposit protection schemes are nothing new. In fact, they were introduced five years ago in 2007, and since then most landlords have gotten used to them and understand their use. However, the government have recently decided to alter the legislation so that landlords now have to re-protect their tenants’ deposits more often. This has left many landlords confused and unwittingly breaking the law, which is why we explain the new rules and how they will affect you here:
What are Deposit Protection Schemes?
If you are an experienced landlord then you probably have had a number of experiences with deposit protection schemes, however those with smaller property portfolios may have only registered deposits on the odd occasion. Deposit protection schemes were brought in to protect both landlords and tenants and ultimately settle disputes over deposits at the end of a tenancy. For instance, some rogue landlords would spend their tenants’ deposits before the end of their tenancy and then claim that the money was needed at the end for repairs. When this happened previously many tenants found it difficult to fight their cause, and many didn’t even know who to go to, which is why deposit protection schemes were introduced.
At the same time, landlords have benefited from these schemes as it means that if a tenant refuses to take responsibility for damages that they caused to a property they can contact their deposit protection scheme and arrange for them to settle the dispute. To make things easier for everyone the decision made by those who run the deposit protection schemes is final, and they are usually dealt with in a matter of weeks meaning that neither tenant or landlord will be owed money for a substantial amount of time.
How are Deposit Protection Schemes Changing?
Two weeks ago the Court of Appeal ruled that from now on landlords must re-protect their tenants’ deposits if they finish their fixed tenancy period and then begin a periodic tenancy. This means that if you have a tenant whose fixed tenancy has finished yet needs to stay in the property for a slightly longer period of time you will need to pay to have their tenancy protected once again. Furthermore, you will need to go through all the paperwork required to protect the deposit and issue this to your tenant within thirty days of their periodic tenancy beginning.
To make things more confusing, even though the Court of Appeal has made this ruling the actual government-approved deposit protection schemes don’t have this requirement themselves. As far as your deposit protection scheme is concerned you only need to re-protect a deposit if you are issuing a new Assured Shorthold Tenancy to your tenant.
How will this Affect Landlords?
Firstly, since the new ruling came in a number of landlords throughout the country are breaking the law without even knowing it. This opens up a huge problem as it means that not only are landlords more at risk but also that their landlord insurance premiums could increase in order to cover them against stricter legislations. Secondly, the fact that a landlord needs to re-protect a deposit if they choose to let a tenant stay in their property after their fixed tenancy agreement means that fewer will be likely to offer this service in the future.
During a time where landlords are being encouraged to make tenancies more lenient and tenant friendly introducing new legislations such as these seems illogical. Ultimately, landlords are unable to be flexible with tenants if it means that it will end up costing them extra or even unwittingly breaking the law. To make things even more worrying a statement issued by the government-approved protection schemes said that if landlords are concerned about the new legislations they should obtain their own legal advice.
The government has promised a number of times recently that they will change the private rented sector in order to help those looking for new properties and are struggling with the increasing cost of rent. However, introducing new legislations such as these could make the whole thing more difficult, as it is naïve to think that landlords will be able to pay out more and charge less for their services.
The post 3 things landlords need to know about deposit legislation changes appeared first on Just Landlords.
