tenancy deposit booklet.qxp layout 1 15/03/2019 15:11 page ... · tenancy deposit...

Tenancy Deposits

www.wolverhamptonhomes.org.uk

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three Tenancy Deposits

What’s in this guide? Tenancy deposit protection was introduced in April 2007 and is designed to safeguard your deposit, and make sure you get the deposit back when you move out (provided you have kept to the terms of the tenancy agreement). This guide outlines the three Government-backed schemes, the law that landlords must follow and what happens if things go wrong. You can also read about what other charges a landlord or lettings agent can charge. The material in this guide has been prepared for general information purposes only. It is not a substitute for getting advice from us or a suitably qualified person. This means you should not rely or act upon this information without seeking advice about your own individual circumstances. This guide contains links to other websites. They are underlined like this. External links were selected and reviewed when this guide was published. However, we are not responsible for the content of external websites. This is because we do not produce them or maintain/update them and cannot change the content. This guide is up to date as at 1 February 2019. Landlords can choose between two types of scheme. A custodial scheme, in which the deposit is held by the scheme. This is free to join and is funded by the interest generated by deposits. The other type is an insurance-based scheme, in which the landlord keeps the deposit and pays a fee.

The insurance-based scheme You pay a deposit to the landlord who keeps the money and pays a premium to the insurer. Within 30 days of receiving a deposit, the landlord must give you information about the scheme being used and some prescribed information (see page 3). At the end of the tenancy, if you and the landlord agree how the deposit should be divided, the landlord returns all or some of the deposit. This should happen within 10 working days. If there is a dispute, the landlord must hand over the disputed amount for safekeeping until the dispute is resolved, either through court or alternative dispute resolution (see page 4). Example 1 You pay a deposit of £500. At the end of the tenancy, the landlord says he wishes to keep £200 to pay for replacing damaged carpet in the hallway. The remaining £300 will be returned to you. You disagree, claiming the carpet was not new when you moved in. The disputed £200 will be transferred to the scheme administrator until the dispute is settled. The rest is given to you. If anything goes wrong, the insurance arrangements will ensure the return of the deposit if you are entitled to it. Insurance-based providers include MyDeposits, the Tenancy Deposit Scheme and the Deposit Protection Service. Deposits previously protected by Capita Tenancy Deposit Service are now protected by Mydeposits.


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The custodial scheme

You pay a deposit to the landlord. The landlord pays the deposit into the scheme. Unlike the insurance-based schemes, the landlord doesn’t keep the money. This scheme is free for landlords. Within 30 days of receiving a deposit the landlord must give you information about the scheme being used and certain prescribed information (see below). At the end of the tenancy, if you and the landlord agree how the deposit should be divided, either of you tell the scheme which returns the deposit. This should happen within 10 working days. If there is a dispute, the scheme holds the amount until the dispute resolution service or courts decide what is fair. The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 sets out the prescribed information that a landlord must give to a tenant who has paid a deposit.

How much is the deposit? From 1 June 2019 the deposit can be no more than 5 or 6 weeks rent (see page 4). Anything more than that is a prohibited payment and must be returned to you. If either the landlord or lettings agent doesn’t return the prohibited payment they can be fined and will be unable to use a section 21 notice to recover possession of the property until they do. Anything other than the following is a prohibited payment: • A tenancy deposit; • A holding deposit (capped at one weeks rent); • The cost of replacing a key or other security device;

• Charges for unpaid rent (capped at 3% above the rate of interest); • A change to the tenancy agreement or early surrender of the tenancy. Example 2 A tenant misses a rent payment of £500 on 1st July and a further payment on 1st August. On 28th September the tenancy ends, and the landlord intends to charge for payment. The Bank of England base rate of interest is currently 0.75%. £500 for the rent amount for the first 31 days £500 x 0.0375 = £18.75 £18.75/365 = 5p per day 5p x 31 = £1.55 for the first 31 days of arrears at that total. £1000 = rent amount in arrears for the last 27 days £1,000 x 0.0375 = £37.50 annual interest £37.50 / 365 = 10p per day 27 days have passed since the tenant went into arrears so 10p x 27 = £2.70. £2.70 + £1.55 = £4.25 in arrears can be charged for the late rent.

This means the following fees will be a prohibited payment (from 1 June 2019): • Charging for a guarantor form or checks • Credit checks • Inventories • Cleaning services • Referencing • Having the property de-flead as a condition of allowing pets in the property


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• Admin charges • Requirements to have specific insurance providers • Gardening services • Checking in or out Tenancies which began before 1 June 2019 does not have a cap on the amount of deposit a landlord can request, but from 1 June 2020, any payments other than those listed above, will be a prohibited payment and must be returned to the tenant. However, if a new or replacement tenancy is agreed on or after 1 June 2019, then the above prohibited payments will apply. This means a landlord or lettings agent cannot charge for agreeing a new tenancy, even though the property is the same, you haven’t moved out and everything else is the same. A tenancy deposit is capped at 5weeks rent if the yearly rent is less than £50,000 or 6weeks rent if the yearly rent is above £50,000 (unlikely in Wolverhampton). If you are interested in a property the landlord or lettings agent can ask for a holding deposit, which is capped at the equivalent of a week’s rent. Once a holding deposit is taken, the landlord has 15 days to decide. If the tenancy does not go ahead then the money must be repaid in full within 7 days of the deadline being reached or the landlord backing out. Repayment does not need to be in full if the tenant backs out of the tenancy agreement themselves, fails right to rent checks, has provided false or misleading information, or where the landlord tries their best to get the information needed but the tenant fails to provide it within the 15 days.

If the tenancy does go ahead, the holding deposit must be returned within 7 days of agreement, unless it is converted into part payment of the actual deposit or used towards the initial rent payment (only with the tenant’s agreement).

Changes to the tenancy While most costs related to amending or surrender of a tenancy are prohibited, landlords and lettings agents can charge certain small sums to tenants if the tenant requests a change in tenant or an early surrender. Where the tenants have requested a change to the tenancy, the landlord may charge a fee of £50 for the change or the costs incurred. They must be able to evidence in writing any costs incurred if they do go above that amount and £50 is considered the norm for landlords and agents. Where the tenants have requested early surrender of the tenancy, the landlord or agent may charge fees equivalent to the loss incurred. As charges such as referencing, tenancy drafting, etc. are prohibited payments landlords will not be able to show a loss has been incurred for the provision of these services. Instead, landlords and agents will be able to charge the equivalent of the rent lost due to the unforeseen void period.

Third-party payments Some third-party payments can be required as part of the tenancy agreement. Most can be used by landlords and agents, but some are exclusive to landlords. Landlords and agents A contractual clause insisting on the tenants paying the television licence is an acceptable payment.


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A clause insisting on the tenant paying the council tax is an acceptable payment Landlords only A clause requiring the tenants to pay for the landlord's costs from a specific service provider for utilities is a permitted payment. A clause requiring tenants to pay the landlord's cost for a specific communication service (phones, broadband, cable/Sky TV) is permitted for landlords. If the landlord seeks to charge more than the billed costs for these services, then any excess will be considered a prohibited payment. Be careful of so-called Deposit Replacement Schemes. These are insurance-type schemes, whereby the tenant purchases an insurance product instead of paying a deposit. Typically, the lettings agent or landlord will receive commission from the insurer. Contact us for advice if you are offered this type of scheme.

Tenancy deposit disputes If you and the landlord cannot agree on what can be deducted from the tenancy deposit, all the schemes offer alternative dispute resolution (ADR). Either you or the landlord may opt to use the courts instead to resolve deposit disputes. Because participation in the ADR process requires consent by both parties, the final decision of the adjudicator is binding on both the landlord and tenant. It cannot be challenged except through court– although you should seek your own independent legal advice first. The Schemes are not permitted to re-open cases unless it can be shown that the scheme did not follow the processes laid down in its

own rules or did not consider all the evidence submitted by the parties. In principle, tenants should be able get all or part of their deposit back if they have kept the property in good condition and meet the requirements for the return of the deposit. Charges for ‘wear and tear’ should not be deducted from the deposit. The website of the relevant scheme should provide further information (see page 3). A landlord who doesn’t protect the deposit on time, or at all, will lose certain rights, including the right to serve a section 21 Notice seeking Possession. This is how a landlord can end an assured shorthold tenancy on or after the expiry of the initial fixed term. If a landlord does not protect a deposit, there is no ADR to use. Tenants will need to apply to their local court. There are plenty of ‘no win no fee’ firms that deal with tenancy deposit disputes, but the court procedure is intended to be simple enough for people to use without needing a solicitor. However, if you need to claim more than £10,000 (the current limit for small claims), or you want help with the process, get advice. If you can answer YES to ALL the following questions, you might have a claim. If you are not sure of the answer, or if you answer NO to any of the questions, contact us for guidance. 1. Did your tenancy begin on or after 6 April 2007? 2. Is/was the annual rent less than £100,000 but more than £250 (£1,000 in London)? 3. Do you/did you, occupy the property as your main or principal home?


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4. Does/did your landlord live somewhere else, not at the property? 5. Did you pay your landlord, or your landlord’s agent, a deposit?

6. Did you pay the deposit more than 30 days ago?

7. You have received no information from the landlord or the landlord’s agent about a tenancy deposit protection scheme. 8. You have not been able to get confirmation from a tenancy deposit scheme administrator that your deposit has been paid into a scheme. Who is the claim against? The claim is against the person who received the deposit. If you paid your deposit to an agent, it depends on whether they were “letting only”, in which case they should have paid your deposit to the landlord and the landlord should protect it, or “managing agent” and directly responsible for protecting the deposit. The law says that “landlord” includes anyone acting on the landlord’s behalf. If in doubt, name the landlord as the defendant and the letting agent as the second defendant. If more than one person is your landlord, you should make the claim against all of them. What is the claim for? Landlords and agents who take money from tenants and prospective tenants must put that money into an authorised tenancy deposit protection scheme within 30 days of receiving it. Landlords and agents also have an obligation to give prescribed information to the tenant, and to anyone who paid the deposit on the tenant’s behalf, within 30 days of receiving the deposit.

If the landlord or agent fails to protect the deposit, or if they fail to provide the prescribed information, the tenant or the person who paid the deposit can take the landlord or agent to court, and ask for an order that the deposit is repaid (if the tenancy has already ended) or that the deposit is put into tenancy deposit scheme (if the tenancy is ongoing) If the court makes one of the above orders, it must also order the landlord or the agent to pay the claimant an amount equal to three times the deposit. There are therefore potentially two claims: one that the deposit has not been protected and another that the prescribed information has not been provided. You can also claim interest and court fees.

Top tips for Deposit Protection If you are acting as a Litigant in Person (i.e. without a solicitor), there are some additional costs you might be able to claim, in addition to an hourly rate, for work undertaken on the case (see Civil Procedure Rule 46). Pre-action The pre-action stage is about exchange of information between the prospective parties in the hope that the dispute can be settled without the need to go to court, which should always be a last resort. Because tenancy deposit cases currently doesn’t have a specific Pre-Action Protocol the general Pre-Action Conduct principles should be followed. See also Civil Procedure Rule 56 and Practice Direction.


How much does it cost? You must pay a court fee to start your claim but can claim it back from your landlord if you win your case. You lose the court fee if you don't win. Fees are subject to change: check how much it costs by clicking here. If you’re on a low income, or if you’re on certain benefits and do not have much in savings, you might be able to get money off your court fee. Check the eligibility for help with court fees before you apply.

Starting a claim Before you make a claim, think carefully about whether there are any alternatives to court. As a minimum, you should write to the landlord or agent requesting a refund of your deposit if the tenancy has ended, or for your deposit to be put into a deposit protection scheme if the tenancy is still in existence. A sample letter is provided below. Wait for a reasonable time for a response before applying to court.

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Evidence You should submit as much evidence as you can with your claim form. You will need a copy of the evidence for each claim form – which means a minimum of 3 copies and an additional copy for each additional defendant (e.g. where there are 2 or more landlords). The court will serve your evidence on the defendant with the claim form. You can submit

evidence later but, if you do, you will have to file it at court and serve it on the landlord yourself. The court will not serve evidence on the landlord if you do not submit it at the same time as you issue your claim form. It is therefore worth getting your evidence together at the outset. The better your evidence, the easier your claim will be to prove.

Facts Evidence You are or were an assured shorthold tenant Tenancy agreement or proof of rent payment if no tenancy agreement is available. You paid a deposit A copy of the cheque, or your bank statement or credit card statement and/or receipt from the landlord or the letting agent. The claim was served on the correct defendant An office copy of the landlord’s title from the Land Registry The landlord has not complied with the initial A witness statement saying the landlord has requirements of an approved tenancy deposit not given you (and any other person who paid protection scheme your deposit) the prescribed information. The landlord has not protected the deposit. Confirmation from the three tenancy deposit schemes.


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If your landlord or agent replies and is being reasonable, you should cooperate as much as is reasonable in the circumstances. As we’ve said, court action should be a last resort. You could also write to the tenancy deposit scheme administrators and get confirmation from them that your deposit is not protected. A sample letter to scheme administrators is also provided below. If the letter to the landlord or agent does not produce a result, you may have to make a formal claim. Claims are made in the county court. You will need to complete Form N208, which is available free of charge from the court or downloadable from the HM Courts Service website. As part of the claim form you will have to write the Particulars of Claim. You will need to make at least 3 copies of the completed N208 form – one for yourself, one for the court and one copy for the landlord. Keep receipts as these can be recovered if you are successful. If your landlord consists of more than one person, you will need a copy of the form for each person. Attach a copy of your evidence (i.e. tenancy agreement, letters from the scheme administrators) to the claim form. You should also write a brief witness statement, outlining the facts of the case. Take or send completed forms, with the court fee to your local court office. If you are claiming a fee remission, it’s better to take the forms to court, together with evidence of your income.

What happens next? The court will send a copy of your claim to the landlord or agent. You will receive a notice of issue from the court, showing you the deadline by which the landlord or agent has to respond. The landlord or agent will either admit all or part of your claim, dispute your claim, make a counter-claim or simply not reply. If the claim is admitted, the landlord or agent will send you a form of admission. The defendant may also use this form to ask for time to pay, but you do not have to agree to this. If the defendant does not reply, you can ask the court to make a “judgement in default”. You should do this as soon as possible after the defendant’s response deadline has passed, and at the latest within 6 months. If the defendant disputes your claim or makes a counter-claim, you will get a copy of their defence form and more forms to fill in. Will I have to go to court? Many cases are settled out of court, but not all. If the claim isn’t settled, not all court cases result in a hearing. In many properly prepared claims for tenancy deposits, the landlord will not have a defence, and a hearing should not be necessary. If court proceedings have not been necessary at all, you should confirm the terms of the settlement in writing. The court will let you know if you are required to attend. They may give you certain things to do before the hearing (called Directions), such as sending documents to the landlord or agent, and you must make sure you comply with the court’s instructions and any deadlines, before the hearing.


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If you do have to go to court, be well prepared. You will not have long to put your case forward, and judges won’t like it if you don’t have all the relevant information you need at your fingertips. Deposit protection cases will usually be heard in private, rather than in formal open court, but some are heard in open court (where members of the public can attend). Most cases will be decided mainly on the written evidence, such as the tenancy agreement, proof that you paid the deposit, and confirmation from the scheme administrator that the deposit has not been protected. Although you may not be asked to swear an oath and give evidence, you are required to sign a statement of truth as part of your claim and at the bottom of the witness statement. You can be cross-examined on their content. Knowingly giving false information in your claim is an extremely serious matter and you should never, never do this. The hearing On the day of the hearing (if there is one) allow plenty of time to get to court and arrive at least half an hour before the start time. If you are relying on documents that have been disclosed, take the originals with you. On arrival check in with the usher so that the court knows you are there. The other party may have a lawyer or representative at court and they will often want to speak with you before the hearing. It may be possible to agree all, or some aspects of the claim before the hearing and this will assist the court. You might also agree a settlement. The Judge and any lawyers at a small claims hearing will be wearing suits but not wigs or

robes. It is advisable for litigants-in-person to dress smartly. The hearing will usually be held in the Judge’s chambers but occasionally the court may hold the hearing in an actual courtroom. You can check with the usher, so it does not come as a surprise. Even if the hearing is in a courtroom it will still be informal. Usually all parties and witnesses remain seated while addressing the Judge, unless they prefer to stand. A Deputy District Judge or District Judge will usually hear the claim. If they are male address them as ‘Sir’; if they are female as ‘Madam’ or ‘Ma’am’. Occasionally a Circuit Judge may hear a small claim; they should be addressed as ‘Your Honour’ unless they inform you otherwise. In small claims the witness statements stand as that witness’s evidence and the other party is given an opportunity to cross-examine the witness. Where both parties are unrepresented the Judge will more than likely have their own questions which they will ask the witness. After the Judge has heard/seen the evidence then they will hear from each party or representative. This is called a ‘closing speech’. This is the opportunity to point out specific answers that were given in evidence and draw the Judge to the evidence/documents that you say supports your case. It is not unheard of for the landlord, or their agent, to make a counterclaim for rent arrears or damage to the property. Sometimes they will turn up at court without any warning or indication of their defence is. It is therefore prudent to take proof of rent payments and photographs of the condition of the property to court with you.


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The court hearing might be adjourned if the court needs further information. If they can, the Judge will normally give judgment immediately after closing speeches. They will set out the facts of the case and their reasons for the decision. The decision will set out who the Judge finds to be liable and what ‘remedy’ the court is granting, for example repayment of the tenancy deposit and damages. It is advisable to take as good a note as possible of the judgment. The Judge will then ask each party what they say about costs. Make sure you take a statement of costs with you. There is no need to take your receipts to court but keep them safe in case the defendant disputes the amount you have claimed, and the costs go for detailed assessment. It is more likely that (assuming the amount is reasonable), the judge will make a summary assessment of your costs there and then. Very occasionally the Judge may give a ‘reserved judgment’, this means they need more time before making a decision. Another hearing will be scheduled where they will ‘hand down’ the judgment (read it out) and then hear what the parties say about costs. In some cases, you won’t have to attend court for the ‘hand down’ and you will make submissions about costs, in writing.

Useful contacts Citizens Advice – free, independent, confidential and impartial advice. Shelter – housing and homelessness charity who offer advice and support. Crisis – advice and support for people who are homeless or facing homelessness. National Homelessness Advice Service – free expert advice. Money Advice Service – free and impartial money advice. The Law Society – to find a lawyer. Gas Safe Register – for help and advice on gas safety issues. Electrical Safety First – for help and advice on electrical safety issues. If you need to contact Housing Options you can fill in this form or visit your local One Stop Shop. Email us: [email protected] Phone us: 01902 556789 (choose option 6). Drop in to see us: Bilston Bilston Town Hall, Church Street, Wolverhampton, WV14 0AP Wednesfield Alfred Squire Road, Wolverhampton, WV11 1XU City Centre 29 Market Street, Wolverhampton, WV1 3AG


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Letter requesting a refund from landlord or agent Where there are square brackets, you need to insert information, if prompted, or make a choice whether to include the words in square brackets or not. Obtain a certificate of posting from the post office (free of charge) or send recorded delivery. Keep a copy of your letter and make a note of the deadline in your diary or on your calendar.

[Your name and current address here] [Date of your letter here]

[Landlord’s or agent’s name and address here] Dear [Landlord’s or Agent’s name here] Re: [Address of property you rented] I am the [former] tenant of the above property. My assured shorthold tenancy agreement is dated [date of agreement here]. On [or about] [date deposit was paid] I paid you [your agent] a deposit of [amount of deposit here] as security against my obligations in the tenancy agreement. Since then: I believe you have not met the initial requirements of an authorised tenancy deposit protection scheme; [and/or] I have not been able to obtain confirmation from a scheme administrator that my deposit is being held in accordance with such a scheme; [and/or] I have not received the prescribed information which you are required by law to send me within 30 days of receiving my deposit In the circumstances, I am entitled to [have my deposit refunded] [have my deposit paid into a tenancy deposit scheme and to receive the prescribed information] and you are requested to attend to this within 7 days of the date of this letter. If I do not hear from you within 7 days, with satisfactory evidence that you have complied with the obligations, I may begin legal proceedings to recover my deposit without further recourse to you. My claim will include a claim for any interest, costs and compensation to which I may be entitled. Yours sincerely [sign here] [print your full name here]


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Letter asking scheme administrator for con�rmation that deposit is protected Where there are square brackets, you are required to insert information, if prompted, or make a choice whether to include the words in square brackets or not. Obtain a certificate of posting from the post office (free of charge) or send recorded delivery. Keep a copy of your letter and make a note of the deadline in your diary or on your calendar

[Your name and current address here] [Date of your letter here]

[Scheme administrators name and address here] Dear Sirs Re: [Address of property you rented

Landlord name and address Name and address of agent (if applicable)]

I am the [former] tenant of the above property. My assured shorthold tenancy agreement is dated [date of agreement here]. On [or about] [date deposit was paid] I paid [name of agent or landlord] a deposit of [amount of deposit here] as security against my obligations in the tenancy agreement. Please would you confirm whether my deposit is or was protected by the deposit protection scheme administrated by you. A reply within the next 14 days would be much appreciated. Yours faithfully [sign here] [print your full name here]


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