Tenancy deposit protection: the importance of effective enforcement

Landlords and agents who fail to protect a tenant’s deposit face fixed penalty charges and, ultimately, prosecution.  Solicitor Chris McGrath discusses the risks that landlords face if they don’t ensure that deposits have been adequately protected.

There is limited public information available about actual prosecutions against landlords or agents who fail to protect tenants’ deposits, but the penalties can be harsh.  We know of one agent who was fined a total of £15,000 for failing to comply with the relevant legislation.

The Private Tenancies Order (NI) 2006 requires that any deposit paid in respect of a private tenancy be protected in an approved scheme and the legislation sets out the offences committed by a person who fails to comply with this requirement and the appropriate penalties which can be used to deal with these offences. Appropriate enforcement against rogue landlords and agents is essential to ensure the effective operation of tenancy deposit protection schemes, which have been in place locally since 2013.

Deposit scheme requirements

On 1st April 2013, Northern Ireland joined the rest of the UK in implementing deposit protection for private tenants. All private tenancy deposits received on or after 1st April 2013 must be protected with a government approved scheme administrator. The Tenancy Deposit Scheme Regulations (NI) 2012 set out the framework within which these scheme administrators must operate.

In a nutshell, any person who receives a deposit has 14 days to protect this money in an approved scheme and 28 days to inform the tenant that the deposit has been protected and to furnish the tenant with certain prescribed information relating to the deposit.  The clock starts ticking as soon as the deposit money has been received.

The principle purpose of deposit protection is to provide an independent dispute resolution mechanism to resolve disputes over deposits at the end of a tenancy. All scheme administrators must provide a free and impartial dispute mechanism to any tenant who is unhappy with the deposit deductions being proposed by their landlord. Tenants who paid deposits before 1 April 2013and those whose landlords have failed to comply with the legislation will have to make attempts to dispute deductions themselves, through informal negotiations or by taking the landlord to court.

Agent fined £15K for failing to protect deposits

A recent letting agent prosecution resulted in fines totalling £15,000. The matter involved five separate cases where the deposit had not been protected.

Councils are tasked with enforcing the rules on deposits and have the power to issue the landlord or agent with a fixed penalty where the deposit has not been protected or the relevant information has not been served on the tenant.  In this case, the fixed penalty notices were reported to total over £9,000.

Following the letting agents’ failure to pay the fixed penalty notices enforcement action was commenced through the courts.

On hearing the matter, the Magistrates Court considered the offence to be significant and increased the total fines to £15,000.  In addition to the fines being handed down, the Court is also reported to have granted compensation orders for the repayment of the deposits totalling £3145 and to have issued an order for costs against the agent.

As such prosecution actions are heard before the Magistrates Court written decisions are seldom made available by the Court. However, it is also the understanding of Housing Rights that the this decision is not an anomaly and that many district councils are now achieving significant prosecutions against landlords or agent who fail to protect their tenants’ deposits. However, it remains important to ensure such action is being taken uniformly from council to council and we would be interested to hear of any cases where councils have decided not to pursue action.

The penalties, in this case, are significant and illustrate both the council’s commitment to responsible enforcement action and the resolve of the court to exercise its powers under the Private Tenancies Order.  This should be viewed as a cautionary tale for landlords and agents and highlights the importance of ensuring that anyone providing tenancy management services is well-versed in their legal obligations.

Private Rented Sector in Northern Ireland – Proposals for Change

The Department for Communities has recently released a consultation document on its proposal for the private rented sector in Northern Ireland. Within this consultation, recommendations are made to further enhance the effectiveness of the tenancy deposit protection scheme.

The consultation includes a commitment from the Department to encourage all councils to be more proactive and to prosecute incidents of non-compliance in line with the powers granted to them by the existing legislation.

The Department will be attending the Housing Rights’ Practitioners’ Forum on 7th February, to brief attendees on their proposals and take questions. This forum is free and open to members of Housing Rights; you can register to attend by e-mailing our Policy & Practitioner Support Officer, Sharon.

Further reading

Read the Department’s proposals in full.

Read Housing Rights response to the Department’s initial Discussion Paper, containing our policy positions on many of these areas.

We have previously published several Briefings, on topics relevant to this Review:

• Policy Briefing on Landlord Licensing
• Research Briefing on affordability in the private rented sector
• Policy Briefing on Letting Fees in Northern Ireland