Landlords and Tenants of residential properties have been aware
of the need to protect Tenants' deposits within authorised
schemes since 2007. That obligation is clear, but there has been
much confusion surrounding the penalties which apply to the
Landlord for failing to comply with the protection obligations. A
proposed change in these regulations, contained within the Localism
Act 2011, seeks to clarify the position and override the previous
case law of which rendered the previous penalty system useless.
Since 2007, the Housing Act 2004 has contained an obligation on
Landlords to protect a deposit within 14 days of the date of
receipt. At first glance, the Act contains a penalty for failing to
protect the deposit. That penalty has been three times the value of
the deposit itself. In two Court of Appeal cases, the Court has
interpreted these provisions to effectively mean that the Landlord
can in almost all circumstances avoid liability for the penalty.
That is the
