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Penalty for a residential landlord’s failure to pay deposit into approved scheme only applies if claim enforced before tenancy ends- 27/01/2012
The requirement that a landlord of a shorthold tenancy must pay the tenant’s deposit into one of three approved schemes, or risk paying the tenant a penalty of three times the amount of the deposit, only applies where the tenant does not claim the deposit back before the end of the tenancy.
Tenants paid a deposit but the landlord did not pay it into an approved scheme. When the tenants left, the landlord retained some of the deposit to cover repairs.
The tenant went to court claiming that, because the landlord had not paid the deposit into an approved scheme, as required by law, he was liable to pay the penalty of three times the deposit. The court said that the claim failed because the tenancy had ended before the claim was made. The Court of Appeal agreed.
However, recent case law also says that a landlord can avoid the penalty by paying a tenant’s deposit into a scheme before the hearing of the claim against him. So if a tenant does try to enforce a claim before the end of the tenancy, he can simply pay the deposit into the scheme.
Recommendation
Landlords should ensure that, if a tenant makes a claim against them before the end of a tenancy, they should pay the deposit into an approved scheme immediately.
Case ref: Gladehurst Properties Limited v Varid Hashemi [2011] EWCA Civ 604
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