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Landlord seeks advice on tenancy deposit / section 21 issues

August 7, 2013 by Tessa J Shepperson

houseHere is a question to the blog clinic from LJ Filotrani who is a landlord

My question is concerning deposits and Section 21

Tenants moved in on Aug 11, 2012 – they didn’t pay the full deposit until a couple of months into the tenancy so I stupidly did not secure the deposit.

Since then they have given me the run around and now owe me £2,600.

I tried to give their deposit back so that I could serve them a Section 21 – they wouldn’t accept the money.

As they are now more than two months in arrears I have said that I want to start court proceedings under section 8. They have said can I use their deposit to reduce the amount owing. They have sent me a signed letter confirming that I can use the deposit in lieu of rent – my understanding is that I can now serve a Section 21 – is this correct?

And lastly – I understand that the short-hold assured tenancy will automatically become a periodic contract from midnight on Aug 11 – does this mean I could secure their deposit from the beginning of this new contract? And then serve them with a Section 21?

There are a number of issues here.

Deposits paid by instalments

This is very bad news as the fact that the tenant has not paid all the deposit does not mean the landlord does not have to protect what they have paid within the 30 days. Then you have the aggravation of having to protect twice, or even more times if there are more instalments.

My advice is not to accept payment of the deposit by instalments. Better allocate the rent towards the deposit – it will be less problematic in the end.

Refunding the deposit money

You need to pay in a way that they cannot refuse. Obvious candidates are paying the money into their bank account or handing over the cash (or throwing it down at their feet I suppose if they refuse to accept it).

Or you could put the cash in an envelope through the letter box as the lady did in this post here.

Have a witness with you in case the tenants later deny that they have had it.

Offsetting the rent against the deposit with the tenant’s consent

Yes, as you have written confirmation that they have agreed to this, it does now mean you can serve your s21 notice.

This is under the amended Housing Act 2004(2A)(b) which says

(a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant,

It does not let you off the penalty however.

Deposit on periodic tenancy arising

The point, which came up in the recent Superstrike case, about the periodic tenancy being a new tenancy is that it means that you may have to re-protect the deposit and re-serve the prescribed information AGAIN. (We are not sure if you actually do or not, as the Court of Appeal decision does not say – this is the problem and the cause of a all the uncertainty).

It does not mean that the periodic tenancy arising is a chance for you to wipe the slate clean and regularise things by protecting the deposit at that stage.

Once you fail to protect and serve the information within the 30 days this brings into play the penalties and you can only serve your s21 notice if you comply with s2A of the act. The options being

  • return the deposit money, or
  • offset the deposit money against money due from the tenants – but only with their consent, unless
  • the tenant has already brought a claim for the penalty, which has been resolved in some way

Advice

As your tenants have now agreed to the offsetting of the deposit against the arrears, I suggest you go down the s21 route.

Otherwise, if you use the s8 / rent arrears ground route, this will give them an opportunity to defend and counterclaim based on a claim for the penalty.

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Filed Under: Readers problems Tagged With: Deposit, Section 21

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IMPORTANT: Please check the date of the post above - remember, if it is an old post, the law may have changed since it was written.

You should always get independent legal advice before taking any action.

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About Tessa J Shepperson

Tessa is a specialist landlord & tenant lawyer and the creator of this site! She is a director of Landlord Law Services which runs Landlord Law and Easy Law Training.

« Why a periodic tenancy arising at the end of a fixed term is actually a new tenancy
Can tenant claim compensation for landlord's breach of contract? »

Comments

  1. Richard Watters says

    August 7, 2013 at 9:19 AM

    Phew, this gets complicated.

    Ref the S8 vs. S21 routes, I routinely use the S21 regardless of arrears, and then if they refuse to settle up on leaving the property, use MCOL online to pursue either the tenant or the Guarantor.

    Tessa, what are your thoughts on this?

  2. Tessa Shepperson says

    August 7, 2013 at 9:30 AM

    Yes, that is the best way to deal with it.

    Always subject to being able to serve s21 in the first place – eg not having any deposit issues.

    You can bring a joint claim against both the tenant and the guarantor.

  3. HB welcome says

    August 7, 2013 at 11:39 AM

    Hello Tessa,

    The idea of throwing used tenners at a tenant and claiming the deposit has been returned sounds a bit mad to me.

    Isn’t a better solution to post a cheque by hand, with an independent witness?

    If the tenant refuses to cash the cheque that is their problem.

    Coltrane v Day seems to cover it;

    http://www.bailii.org/ew/cases/EWCA/Civ/2003/342.html

  4. Tessa Shepperson says

    August 7, 2013 at 11:51 AM

    Coltrane v. Day is a different situation and there is reference in the decision to the cheque being a conditional payment. Which worries me.

    Which is why I prefer the option of paying into the tenant’s bank account or (if that is not possible) handing over the cash.

    It is possible that a process server could be employed to do this, which would make proof of payment easier.

  5. HB welcome says

    August 7, 2013 at 12:30 PM

    Hello Tessa,

    I’m in agreement about paying direct into the tenant’s bank account or handing over the cash (provided it is accepted).

    The part I am uncomfortable with is where the tenant refuses to accept the cash and your suggestion of throwing it at their feet.

    It’s probably just because I’m too mean to go throwing tenners around!

    The “conditional” part was regarding the cheque bouncing or not (which would seem a reasonable condition to make);

    ‘The giving of a cheque for a debt is payment conditional on the cheque being met’

  6. Tessa Shepperson says

    August 7, 2013 at 12:33 PM

    Yes, the throwing at the feet is not recommended save perhaps in very unique and special cases where the tenant is actively avoiding accepting the payment.

    I would prefer the option of handing it to them or putting it through the letter box.

  7. Romain says

    August 7, 2013 at 4:15 PM

    “It does not mean that the periodic tenancy arising is a chance for you to wipe the slate clean and regularise things by protecting the deposit at that stage.”

    I disagree with that part.

    The Superstrike case held that the landlord is deemed to receive the deposit in relation to the SPT when that tenancy arises (that it is a new tenancy was never in doubt, though).
    As such if the deposit was not protected in relation to the preceeding fixed term tenancy, this gives an opportunity to the landlord to protect it at that point without having to refund it. He is then able to serve a s.21 notice, etc.

    However, of course the landlord is still vulnerable to the non-protection penalty in relation to the fixed term tenancy.

    Actually, if the landlord still holds the deposit and does NOT protect it in time when the SPT arises, he becomes vulnerable to a second, additional claim for non-protection!

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