Tenancy Deposit Protection Bites – Or Does It

Tenancy deposit
 

When the Tenancy Deposit Protection legislation came into force in April 2007, dire penalties were promised where landlords or agents did not protect cash deposits taken from tenants. Landlords complained about the bureaucracy, stating that they did not withhold deposits without good cause, but the regulations were introduced anyway. 


Some landlords chose to no longer take a tenancy deposit – good for tenants, no longer required to show responsibility by preparing for a move into private rented accommodation, though not for the landlords who find themselves left with damages and large rent arrears and have no redress of keeping some or all of a tenancy deposit.

The penalties were designed to dissuade landlords and agents from keeping deposits without protection; where it was discovered, the tenant could claim the return of the full tenancy deposit and 3 times the amount of the deposit in compensation. Not all landlords are millionaires and even in lower rent areas, the return of a £500 deposit and £1500 in compensation is not a small sum to have to find, so a big enough incentive for some to protect the deposit in one of 3 protection schemes. 

In addition, questions about tenancy deposit protection were inserted in the N5B, the Court documentation for use with a Section 21, Accelerated Possession Procedure – some landlords suspected that rather than the desire to protect tenants’ deposits, it was a move to eradicate the security the landlords have, to easily obtain possession. 

The trouble with legislation, however, is that it is only a disincentive where landlords are aware of it but, more importantly, the tenant knows about it. Many tenants live in ignorance and we can safely say, there will be many landlords who still do not protect deposits.

A recent case has been cited as an example of the consequences on landlords who decide not to protect deposits. But is it?

A letting agent in Croydon, Thirugnanaselvam Damayantharan of My Lawn Estates, has been jailed for 19 months for major irregularities in the way he conducted his business. He had accepted £15,000 in deposits over a period of 6 years, with at least 33 transactions being made which were clearly bogus – evidence was provided of this, but was this the limit of what he had pocketed?

This was not the normal case of a landlord who has neglected to protect a tenancy deposit. This was a deliberate decision to de-fraud tenants, but even more seriously, prospective tenants, who were rushed into making decisions to accept properties, then driven to a cash machine for the deposit to be withdrawn before the property was ready for habitation.

Most landlords may ask for a holding fee, but not expect the remainder of the tenancy deposit to be paid until the tenancy agreement was signed. A landlord can specify that the deposit be paid in cash, if they have concerns that cheques may bounce, but again, this should be on the day the tenancy begins. In this case, once prospective tenants had paid their money, the agent became difficult to contact and properties seemed to disappear into the ether.

Why am I sceptical that this was really a case of deposit protection penalties? This agent may have been behaving in the kind of way which demanded that deposit protection be introduced, but clearly, his behaviour was a crime. He went so much beyond what the general deposit protection will be, where the landlord forgets, or is outside the specified time limits for protection, or simply does not know.

Deposits must be protected, but hopefully very few landlords will be as blatantly fraudulent as this one. I can only hope that each of the 33 who had paid deposits and not had them returned, had the full penalty of deposit returned plus 3 times the amount of the deposit. With rents in Croydon being as they are, would be enough to see the agent bankrupted, as well as the satisfaction of knowing he was in prison.

For advice on buy to let issues – Ask Sharon

Be the first to comment on "Tenancy Deposit Protection Bites – Or Does It"

Leave a comment

Your email address will not be published.


Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.