Tenancy Deposit Protection - statutory information requirements

Introduction: 

In the first Factsheet of this series on tenancy deposits (Factsheet No. 24) , we provided an overview of the legal requirements for tenancy deposit protection under the Housing Act 2004.  In summary, the provisions require that any form of tenancy deposit, or similar money that is taken at the beginning of an assured shorthold tenancy (AST) on or after 6.4.2007 will be subject to the Government's Tenancy Deposit Protection (TDP) scheme, whether it is called a ‘deposit' or not.  

For tenancies where such deposits are accepted by either landlord or agent, the following provisions will apply:

• The deposit will be required to be protected within one of three statutory schemes
• Landlords and agents will be required to operate strictly according to the scheme rules
• Tenants and others shall be furnished with prescribed information within 14 days of accepting the deposit

Infringement of any of these three requirements may lead to onerous penalties on the landlord.  These sanctions operate under ss. 214 & 215 of the Act and were detailed in the Factsheet No.24.  In summary these are:

• That the landlord is prevented from regaining possession of his property under section 21 of the Housing Act 1988 (the most common and straightforward mechanism for legally evicting a tenant)
• That the landlord can be taken to court by the tenant, and the court is required to award compensation to the tenant comprising THREE times the amount of the deposit.  

Statutory Information Requirements for TDP:

One of the key aspects of the TDP legislation is that the landlord or ‘person accepting the deposit' shall furnish the tenant with certain prescribed information within 14 days of receiving the deposit.  This information must be provided.  Failure to provide the information will mean severe penalties (described above) could apply to the tenancy.  The general requirement to supply information is contained within section 213 of the Housing Act 2004 and detailed further within the Housing (Tenancy Deposits)(Prescribed Information) Order 2007  (SI 2007, No.797). This Statutory Instrument is available on the Office of Public Sector Information (OPSI) website at www.opsi.gov.uk .   The Statutory Instrument requires that the landlord provide certain information to the tenant(s).  This information shall:

1. identify the deposit which has been paid, the address of the property to which the tenancy relates, and
2. provide the name address, telephone number and any e-mail address or fax number of the landlord(s), the tenant(s) and any other ‘relevant person' to the deposit (i.e. a person who contributes towards, or pays the deposit on behalf of the tenant)
3. define the circumstances when all or part of the deposit shall be retained by the landlord
4. provide confirmation (in the form of a certificate signed by the landlord) that the information provided is correct, and that the tenant has been given the opportunity to sign any document containing this information
5. include details of the tenancy deposit scheme being used for protecting the tenancy deposit.  These details should include information which explains the operation of tenancy deposit protection under the Housing Act 2004, and various procedures that will apply to repaying, the money, contacting the parties, and resolving any dispute that may result in relation to repayment of the deposit.  (SI 797, Article 2, paras(1)a to (1)f)

(this is only a summary, see the Statutory Instrument for the full detailed list of requirements.  References to the landlord will be deemed to also refer to an agent acting for the landlord - see Housing Act 2004, s.212(9)).  

Compliance: 

There are two main ways to ensure compliance with the tenancy deposit information requirements:

- by supplying the tenant and any relevant person (RP) with a Deposit Information Certificate

- by incorporating the prescribed information within the tenancy agreement  

Deposit Information Certificate:

Landlords and agents can comply with the TDP information requirements by ensuring that the tenant and RP are provided with a signed Deposit Information Certificate accompanied by information supplied by the relevant deposit scheme provider.  The information must be given to the tenant(s) and relevant person(s) within fourteen days of accepting the deposit.

The certificate should contain the information listed under ‘Statutory Information Requirements' - see above.

Information items 1 to 4 can be supplied by the landlord or agent using a standard form

Information item no. 5 (scheme details) will need to be obtained from the deposit scheme provider.  Different scheme providers have adopted different methods to do this as explained below for each scheme.  For example, the Deposit Protection Service send a standard letter to the tenant(s) and any relevant persons identifying the deposit and names of the tenants, and also enclosing a copy of the scheme rules.  The landlord is then expected to provide the rest of the information in the form of a signed notice.

This information certificate would normally be presented and signed at the same time as signing the tenancy agreement, but in whatever other circumstances may arise, the legislation requires that the certificate is signed by the landlord and, if possible, the tenant and issued within 14 days of acceptance of the deposit, with a copy given to each tenant and relevant person, and a copy of the signed certificate retained by the landlord or agent.

If no tenancy deposit is accepted for the tenancy, then a Deposit Information Certificate will not be required.

Prescribed Information within the Tenancy Agreement:

An alternative approach to compliance with the information requirements is that the landlord incorporates the prescribed information within the tenancy agreement.  

This is the approach adopted by The Dispute Service (TDS).  The drawback to this method is that it results in a legal document that is lengthy and in a format that is not easy to digest.  The TDS scheme, for example, prescribes eight pages of additional clauses which must be incorporated within the tenancy agreement .  To adopt a similar format with the information provided by the Deposit Protection Service, it will be necessary to summarise the relevant terms of the DPS scheme - or append a copy of the full DPS Terms and Conditions document (which adds a further 6 detailed pages of small print, or 26 pages of normal-sized print to the tenancy agreement !).

Because the TDS scheme rules require that the tenancy agreement is amended to contain supplied extra clauses, agents and landlords operating under this scheme will have no choice but to amend their agreement accordingly.

For landlords or agents operating tenancies under more than one scheme, this approach also means that different versions of the same tenancy agreement will need to be prepared and maintained for each tenancy deposit scheme.

Evidence:

The landlord or agent needs to be able to verify that the tenant and relevant persons have been issued with the statutory information - for example when bringing a possession action (under section 21 of the Housing Act 1988).

He cannot rely on simply giving a signed copy of the information certificate to the tenant - the tenant may forget or even deny that he has ever received the statutory TDP information.  So it is important that the landlord or agent retains a copy of the signed Deposit Information Certificate, (or the signed tenancy agreement containing similar information) for his files.

Joint Tenants:

Where a tenancy has joint tenants, then good practice suggests that each tenant should be given a copy of the prescribed information - either in the form of the Deposit Information Certificate, or as a copy of the tenancy agreement.

For evidence purposes, each tenant should be asked to sign the Deposit Information Certificate to verify that the information has been supplied as required under the legislation

Deposit Protection Service (DPS) Scheme:

Under the DPS custodial deposit scheme the deposit is paid to, and held by, the scheme provider during the tenancy. At the time of writing, there are some deficiencies with regard to the prescribed information aspects of this scheme:

• Only part of the prescribed information will be provided by the DPS
• It will be difficult for the landlord to prove that this prescribed information has been supplied by DPS
• The landlord or agent will be required to supply further prescribed information in order to comply with the full legal requirements for Tenancy Deposit Protection - in the form of a Deposit Information Certificate provided to each tenant and any relevant persons.  

Under the DPS scheme, there will normally be a delay (typically 9 days in the writer's experience) between the time the DPS receives the deposit, and the issue of the DPS email or paperwork to the tenant.  Best practice suggests that the deposit information certificate should be issued and signed by the landlord and tenant immediately on receipt of the tenancy deposit.  Whilst this method is safer, and ensures that both the landlord's and the tenant's signature is secured on the documentation, it also requires that the landlord prepares copies of the tenancy deposit scheme information (see Document ‘DPS Terms and Conditions') to hand to the tenant(s) to satisfy the information requirement under paras 2(a) to 2(f) of the legislation.

The ‘DPS Terms and Conditions' document is available either in hard copy from the DPS, or by downloading the document from the DPS website.

The Dispute Service (TDS) Scheme: 

This scheme has the advantage of allowing landlords and agents to continue to hold tenancy deposits accepted under the scheme.  The scheme protects these deposits by way of an insurance policy, which guarantees to repay the deposit if the agent or landlord defaults.

The form and content of the prescribed information (provided within the extra TDS clauses) raises doubts as to whether it is compliant with the TDP information requirements.  For example, the Prescribed Information Order requires that the prescribed information includes the name, address, telephone number and any email address (or fax number) of the tenant.   In the case of joint tenancies, our view is that where the ‘tenant' comprises several people who have all contributed to the tenancy deposit, the names and contact details for all tenants should be included within the prescribed information.  This suggests that a Deposit Information Certificate needs to be completed for, signed by, and given to all joint tenants and all relevant persons to be on the safe side.

Again, we can only advise practitioners to take their own independent professional advice if there is any doubt.

Tenancy Deposit Solutions (TDSL) Scheme:

In the same way as TDS above, this scheme has the advantage of allowing landlords and agents to continue to hold tenancy deposits accepted under the scheme.  The scheme protects these deposits by way of an insurance policy which guarantees to repay the deposit if the agent or landlord defaults. The TDSL scheme makes no specific requirements for special clauses to be added to the tenancy agreement.

In the same way as the custodial scheme, landlords and their appointed agents should therefore provide each tenant with a copy of the Deposit Information Certificate in addition to the scheme information required to be provided under paragraphs  (1)(a) to (1)(f) of the Prescribed Information Order.

TDSL has provided scheme members with a short explanatory leaflet which helps to explain the TDP provisions within the Housing Act 2004, the operation of procedures under the scheme in respect of repayments from the deposit, and the handling of disputes within the TDSL scheme.  This leaflet is also downloadable from the scheme website.  Scheme members should verify with the scheme provider whether this leaflet constitutes compliance with the prescribed information requirements.

At the time of writing we have little operational information and no experience of using this scheme.

Scheme Rules: 

The requirements of section 213 of the Housing Act 2004 also state that where a deposit is received in accordance with an authorised scheme, then ‘the initial requirements of an authorised scheme must be complied with by the landlord within a period of 14 days beginning with the date on which it is received'.

Therefore, non-adherence to the scheme rules can, in some situations, also result in a tenancy failing to comply with the law, and attracting the sanctions provided under sections 214 and 215 (described above).  Particular care should be taken under the TDS scheme, as the scheme rules are prescriptive about the form and content of the special clauses that the scheme requires the landlord or agent to add to the tenancy agreement.  

Whichever scheme is being used, landlords are advised to study the rules or terms of each scheme carefully.

Questions & Answers:

Question: The legislation refers to a ‘relevant person' and that they must receive a copy of the prescribed tenancy deposit information.  Who is the ‘relevant person'

Ans.  For the purposes of these sections of the Housing Act , a ‘relevant person' means "any person who, in accordance with arrangements made with the tenant, paid the deposit on behalf of the tenant".  A ‘relevant person' could therefore be a parent, or a relative or guarantor - in fact anybody from whom money has been received that contributes to the deposit.

Question.  Can the Deposit Information Certificate be signed by an agent on behalf of the landlord ?

Ans.  The legislation is not clear - it says that the prescribed information must be given to the tenant and any relevant person ‘in the prescribed form or in a form substantially to the same effect'.  Common sense would suggest that a properly authorised agent can sign on behalf of his landlord client.  Practitioners will need to take their own professional advice before proceeding in this way.

Question: Surely the courts will take a practical approach to compliance mistakes provided that the landlord has acted in good faith, and not quite followed the regulations to the letter ?

Ans.  This is not necessarily so - there is plenty of caselaw regarding the old section 20 notices that demonstrate that the court will interpret legal requirements strictly.  Where the information requirements are prescriptive, as they are in the case of the tenancy deposit scheme, the courts will normally require that the legislation is followed exactly.  The legislation requires that the information ‘must be given to the tenant ... in the prescribed form or in a form substantially to the same effect'.

Sources for Further Information: 

• The Letting Centre website: www.letlink.co.uk
• The Communities and Local Government website: www.communities.gov.uk and www.direct.gov.uk/en/TenancyDeposit/index.htm
• Custodial scheme website: www.depositprotection.com
• Insurance schemes websites: www.thedisputeservice.co.uk & www.mydeposits.co.uk
  

This summary is intended to assist landlords and letting agents to understand the effect of the law.  It is not an authoritative interpretation - this is a matter for the courts.  For more detail, you should refer to the text of the legislation itself.