All landlords (and agents) taking a deposit from the tenant must comply with the deposit rules, which include serving prescribed information on the tenant within 30 days of receipt of the money.
There is no standard form for this, it is the information that is prescribed, not any particular form. The prescribed information that must be provided to tenants is set out in the Housing (Tenancy Deposits) (Prescribed Information) Order 2007, in particular in section 2 (1).
In this post I want to look at just one of those items:
(g) (vi ) the circumstances when all or part of the deposit may be retained by the landlord, by reference to the terms of the tenancy;
This is perhaps the information which is most likely to be missed out by landlords and agents, many of whom just serve on the tenant the scheme leaflet (which sets out the details of the scheme rules) and the deposit certificate (which sets out the details of the parties names and contact details).
However, neither of these set out the information required in (g)(vi).
Let’s first consider though why this information is important.
The nature of a tenancy deposit.
Perhaps the most important underlying rule about a tenancy deposit is that it is the tenant’s money.
This means that under the general law, the landlord has no right to make any deductions from it. There is no ‘implied right’ to make deductions from the deposit – landlords are only able to do this with the tenant’s consent.
And how does the tenant give consent? By signing the tenancy agreement.
This is why it is so important that landlords HAVE a tenancy agreement. No tenancy agreement = no right to make deductions from the deposit. Which also = claims being chucked out by adjudicators, however horrendous the damage done by the tenants.
Why the tenancy agreement clause is important
The wording of the tenancy agreement clause is important because it sets out the deductions the landlord is entitled to take from the deposit.
So if the clause states that the landlord is entitled to deduct money from the deposit in respect of damage done to the property by the tenant – then that is ALL the landlord is entitled to deduct for.
He can’t, for example, make deductions for losses incurred in some other way – for example getting new keys cut if the tenant fails to return them. Or even for unpaid rent. He should have had a better clause in his tenancy agreement (which incidentally, most professionally drafted tenancy agreements will have).
So the wording of the clause is important. This then is the reason why we have (g)(vi). The tenant needs to know where in the tenancy agreement the relevant clause is so he can check what deductions the landlord is entitled to make from his deposit.
Dealing with (g)(vi) in your Prescribed Information
How then do you deal with (g)(vi) in your prescribed information notice? My view has always been that you need to actually state in your form, the number of the clause in your tenancy agreement which deals with this.
However, I have recently seen a prescribed information form which does not do this. The form is attached to the tenancy agreement and in one part states:
Deductions may be made from the Deposit according to the clauses within the Tenancy Agreement attached.
With another part stating
Deductions may be made from the Deposit according to terms set out in the Tenancy Agreement.
Let’s have another look at what (g)(vi) says
the circumstances when all or part of the deposit may be retained by the landlord, by reference to the terms of the tenancy;
Is this satisfied simply by stating that the tenant has to look at the terms of the tenancy agreement? Or does your prescribed information form actually have to state what the clause number is?
Compliance or non-compliance?
I can see why it is easier for landlords and agents to just use standard wording in their form. It saves them the bother of having to look at the tenancy agreement to check what the clause number is.
If the wording is valid, it also prevents errors if the wrong clause is put in the form by mistake.
I can also see that it sort of complies with the wording of (g)(vi), although not, in my view, with the spirit of the clause.
My view is that this sort of standard wording should not be sufficient to comply with (g)(vi). Tenancy agreements are long and complex. It may be hard for a tenant, unfamiliar with reading this type of document, to find the right clause. They need to be told exactly where it is.
Hence (g)(vi).
Advice to landlords and agents
So my advice to landlords and agents is that the safest course of action is to give the actual clause number in your tenancy agreement – or at least give some general information as to where in the document it is. So your tenant can find it.
Otherwise (if I am right) you may find, in the middle of possession proceedings based on section 21, that your notice is found invalid due to non-compliance with the deposit rules, with your case being chucked out by the Judge, plus, if your tenant is legally represented, a costs order being made against you.
I may be wrong – but do you want to risk it?
NB If anyone has been involved in any claims for possession where this point was in issue, please post a comment below and let us know what view the Judge took and whether the possession order was made or not. Also – what do you put in YOUR prescribed information forms about this?
Simon Lazare says
Is it ok to include the Prescribed information in the tenancy agreement as a schedule dealing with the deposit? I have included, in the schedule, a space for the Landlord’s and the Tenant’s signatures. I have done this so that everything is completed at the same time, i.e. TA and PI, and I don’t have to try and get the tenant to sign the prescribed information after they have moved in when they don’t see any benefit to them in doing so!
Tessa Shepperson says
It’s not really part of the tenancy agreement but there is no problem at all in getting tenants to sign it at the same time and having the prescribed information attached to the tenancy agreement. This is often done.
Assuming of course that you have protected the deposit.
Note that if the tenants pay you the deposit more than 30 days before they sign the tenancy agreement they should be served it earlier otherwise you will be out of time.
Romain says
A security deposit is taken for a reason. Contract terms may be by custom or oral.
A prospective tenant will query what is the purpose of the deposit and the landlord will likely tell the prospective tenant that he will deduct from the deposit in case of damage or unpaid rent.
Therefore I am not convinced that, on the balance of probability (as this is a civil case), a court would reject a claim by a landlord simply on the ground that there is no specific written terms.
Tessa Shepperson says
I know for a fact that deposit adjudicators reject claims because there is no written tenancy agreement – because they have told me they do. I suspect that a Judge would do the same – and I would not advise landlords to risk it.
Still, if you want to risk it and be the subject of a test case, that is, of course, your choice …
Romain says
I just think that deposit scheme should be made to explain how they operate and the basis for their procedures.
In any case, thinking about it, the prescribed information are there to have in writing how the deposit is to be used even if there is no written tenancy agreement.
Therefore, I think that any requirement to have a tenancy agreement in writing in all cases should really be questioned.
Tessa Shepperson says
You don’t have to have a tenancy agreement in all cases. Under s54(2) of the Law of Property Act, you can create a valid tenancy without a written document.
But if you don’t have a written tenancy with a clause about deductions from the deposit, any claim you bring against the deposit will be chucked out by the scheme adjudicators.
If you were to go to court a Judge could possibly come to a different conclusion if he agreed with you but frankly I doubt it.
Romain says
One of my questions is why schemes ‘chuck out’ such claims when the relevant terms were put in writing as part of the prescribed information.
Jane says
Another thing I have come across three times, not specifically to do with wording of PI, is that some agents don’t give the PI to the guarantor or to the person who paid the deposit (if it wasn’t the tenant); I think they could get themselves into trouble for not doing this.
Tessa Shepperson says
@Romain – re ‘One of my questions is why schemes ‘chuck out’ such claims when the relevant terms were put in writing as part of the prescribed information.’
– putting terms in the prescribed information is not sufficient as it is not evidence that the tenant has agreed to it.
Even if the tenant signs receipt of the form this will not suffice. The whole point is that the money is the tenant’s money and landlords can only make deductions with the tenant’s consent. Putting things in the prescribed information after the tenant has signed the tenancy agreement is not enough. You can’t add things into a contract after it has been made.
The prescribed information is to give information about what has already been agreed. Not set up new clauses and add things to the tenancy.
An adjudicator cannot accept a landlord’s claim unless they have evidence that the tenant has agreed to the deductions being made from his or her money.
Romain says
Of course the prescribed information are only to give information which have already been agreed. I don’t think anyone claimed otherwise.
The question, which I think is always overlooked, is: Why do the prescribed information include the terms of the tenancy stipulating how deposit deductions may be made?
My view is that this was done on purpose to ensure a written evidence of these terms even if the tenancy was not agreed in writing.
I should add that the landlord must give the tenant the opportunity to check the prescribed information and to sign to show his agreement with the contents.
Therefore, if the tenant has signed this is as good as having a written, signed tenancy agreement in relation to the deposit.
David Smith says
Deposit adjudication schemes provide free written adjudication services. They do not claim that this is suitable for adjudicating every deposit dispute. Mainly because it is not. If you are trying to rely on an oral agreement then this needs to be tested by live evidence. That is the province of the courts.
One of the problems with deposit adjudication is that many landlords and tenants complain that they have lost when the dispute should never have gone there in the first place.
At the end of the day it’s free. You get what you pay for.
Alexandra Coghlan-Forbes says
If a landlord does not submit a copy of the tenancy agreement when adjudicators at The DPS’ Alternative Dispute Resolution (ADR) service are considering his or her evidence, we won’t simply dismiss the claim. We also take into consideration implied and statutory obligations when assessing each case. Nevertheless, there’s no doubt that if we do see a copy of the agreement the tenant’s parties’ obligations will be far clearer. The landlord’s claim is therefore also more likely to be successful. As a result, we’d strongly recommend that landlords send it in.
Similarly, landlords and tenants do not need to include the Prescribed Information with their evidence during a dispute unless they want to raise a question about terms that were added to it.
As ever, it’s worth bearing in mind that, unlike a judge in the courts, adjudicators in a paper-based dispute resolution service do not have the chance to ask multiple rounds of questions and investigate the circumstances of a dispute. As a result, landlords and tenants should submit all relevant evidence, including the tenancy agreement and Prescribed Information when relevant, in full and before the deadline, and if they are in any doubt about whether to include something they should get in touch with us directly for advice.
Tim says
It is not clear to me why the money needs protecting 30 days from when it is received if it is received before the tenancy commences?
Surely until the tenancy starts this is not a deposit connected to a tenancy, it is just money paid by an applicant to a landlord.
The money only becomes a deposit once the tenancy has commenced, and the 30 days should therefore start from the start day of the tenancy, unless of course the money is received after the start date of the tenancy …?
Tessa Shepperson says
It’s because s213(1) of the Housing Act 2004 says:
Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.
So if the tenancy is created more than 30 days after the receipt of the money you will already be out of date.
Tim says
Thank you for your reply.
Is there any case law on this point please?
I can see your argument, but I am still of the opinion that any money received before a tenancy commences isn’t a tenancy deposit, and will not be one until the tenancy is created.
I can see no definition of what a tenancy deposit is in the Housing Act, so surely it stands to reason that a tenancy deposit is a deposit linked to a tenancy agreement, which of course it cannot be until the tenancy begins.
There is, of course, some ambiguity with the phrase “in connection with a shorthold tenancy”, and I can see how one could argue that, should a tenancy commence after the deposit has been taken, the deposit was going to be in connection with that tenancy.
One could equally argue however that, until the tenancy had commenced, the money was not definitely going to be used for that, or indeed any, tenancy and, as such, I still would maintain that, to be able to definitively call this money a “tenancy deposit”, the tenancy must have been executed.
Tessa Shepperson says
I am not aware of any case law.
Of course, you could be right and I could be wrong. But if I am right, then you will be in breach of the tenancy deposit rules which presumably you won’t want. Are you sure you want to risk it?
Mind you, if you want to fund a test case then that would help us all ….
Tim says
I’ll let the Tenant do that :D
We don’t take the deposit until signing so it won’t be an issue – I just like to calrify matters as best as I can for giving advice.
Thank you
Tim says
*clarify! :D
Michael Barnes says
If you are right that it does not become a tenancy deposit until the tenancy starts, then that does not alter the time when it was received.
It is obviously a tenancy deposit, because that is what it was paid for.
Once the tenancy starts it is obviously “in connection with” that tenancy.
Therefore the law requires that it be dealt with appropriately within the time limits set down from the time it was received.
Tim says
If I am right then the “tenancy deposit” is received when the tenancy starts.
The money you have received is not, and in my opinion cannot be, a tenancy deposit until there is a tenancy.
Therefore, the date you are paid the money is not important, it is the date it actually becomes a tenancy deposit.
You may consider it is obvious that the money taken in advance is “in connection with” that tenancy, however, for example, if the tenancy did not go ahead the money would be refunded but it wouldn’t have been a tenancy deposit as there was no tenancy.
I think you would be unable to state categorically that this money was “in connection with” a tenancy until the tenancy had begun.
Surely, also, if the deposit is protected before the tenancy commences, you would have to provide the prescribed information within 30 days. The prescribed information form gives the applicant the Landlord’s details, which brings data protection rules into play for a tenancy that hasn’t commenced and, indeed, may never commence. More to the point, the form uses the terms “Tenant” and “Landlord”, which clearly there is no such legal entity until the tenancy begins.