August 31, 2011
As the demand for rental properties continues to remain strong and more people consider becoming a landlord for the first time, along with existing landlords looking to further extend their property portfolios, we seek to highlight some of the main legal issues regarding the Buy-to-Let market.
Since 6 April 2007, Landlords who rent properties on an assured shorthold tenancy in England and Wales must protect the deposit they receive via a Tenancy Deposit Protection Scheme. The scheme was set up with the intention of safeguarding tenancy deposits and to provide alternative dispute resolution methods of resolving disputes in relation to deposits. A failure by landlords to do so can have significant detrimental consequences.
There are currently two types of scheme:
Custodial – There is one custodial scheme run by the Deposit Protection Service. For further information please visit their website at http://www.depositprotection.com/.
Insurance-based - There are also two insurance-based schemes run respectively by Tenancy Deposit Solutions Limited and the Tenancy Deposit Scheme. For further information please visit their respective websites at http://www.mydeposits.co.uk/ or http://www.thedisputeservice.co.uk/.
The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 lists the prescribed information which must be provided to tenants. The main pieces of information to provide are:
(i) The name, address, telephone number, email address and any fax number of the appointed scheme administrator together with information provided by the scheme administrator which explains the operation of the provisions of the scheme;
(ii) How the deposit may be paid or repaid to the tenant at the end of the tenancy and what should happen where either the landlord or the tenant is not contactable at the end of the tenancy;
(iii) What should happen where the landlord and the tenant dispute the amount of deposit to be paid or repaid to the tenant and the options available under the scheme for resolving this
dispute without recourse to litigation; and
(iv) Information such as the amount of the deposit paid, the address of the property which is
being rented to the tenant, the name, address, telephone number and any email address or fax number of both the landlord and tenant.
The landlord must sign a certificate which amongst other things includes confirmation that the information he provides is accurate to the best of his knowledge.
Implications of failing to protect the deposit
If the landlord does not protect the deposit or does not provide the prescribed information to the tenant within 14 days of the landlord receiving it, he will be unable to regain possession of the property via a Section 21 Notice. Alternatively, a tenant can apply for a court order requiring the deposit to be safeguarded or the prescribed information to be given to him about the scheme in which the deposit is safeguarded.
Where the court believes that the landlord has failed to comply with these requirements, or the deposit is not being held in an authorised scheme, the court must either order the landlord within 14 days of the making of the order to repay the deposit or order the landlord to pay the deposit to the custodial scheme administrator. The court must also order the landlord to pay to the tenant a fine of three times the deposit amount within 14 days of the making of the order.
If you have any concerns or questions regarding the legal aspects of the Buy-to-Let market, please contact Kyle Wyness, solicitor at Spratt Endicott Solicitors on 01295 204135 or email him at kwyness@se-law.co.uk.
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