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Penalties for Non-Compliance with Deposit Protection can be severe for a Landlord.
Currently Landlords can regain possession of the property after the first six months of an AST, providing any fixed term has expired and the tenant has been given at least two months’ notice (under section 21 of the Housing Act 1988). This right to repossession using the usual ‘notice only grounds’ will be lost if the deposit has not been safeguarded in an authorised scheme and the tenant informed of the scheme within 14 days.
If he/she fails to protect the tenants’ deposit, and / or fails to inform the tenant within 14 days, the tenant can apply for a court order requiring its protection, and to supply the information about the scheme in which it is held, or to return the deposit to the tenant. If the court is satisfied that this deposit is not being held in an authorised scheme, it can order the Landlord to either repay the deposit within 14 days or pay it into a scheme. The court will also order the Landlord to pay the tenant three times the amount of the deposit, by way of a fine, again to be paid to the tenant within 14 days.
Let’s remember that most Landlords and agents already act responsibly by safeguarding deposits. However, there are those out there that don’t. Tenancy Deposit Protection Schemes are put in place to ensure that all Landlords safeguard deposits. It is in the interest of all parties.