Unscrupulous landlords are the target of new legislation which comes into force next month to deal with rental deposits.
Leamington-based law firm Wright Hassall is urging residential landlords to make themselves aware of the rules which mean they will no longer be allowed to keep hold of deposits without justification.
The Tenancy Deposit Scheme, which comes into effect on April 6, will require landlords to safeguard these payments and aims to bring a speedy resolution to any disputes at the end of a tenancy.
Landlords who take a deposit from April 6 will have a choice of two schemes, both designed to remove the risk of tenants having their money held back for no good reason.
The custodial scheme will involve the tenant giving the landlord the deposit which they hand straight over to the scheme.
If at the end of the tenancy the landlord and tenant agree how the deposit should be divided they will jointly notify the scheme which will pay out the money as agreed.
This scheme is free for both sides to use and if there is a disagreement they can turn to a free dispute resolution service.
The alternative is the insurance-based scheme where the landlord retains the deposit but pays a fee to an appointed third party to insure against failure to repay any money due to the tenant.
Mary Rouse from the Property Litigation Team at Wright Hassall said: “The government-authorised scheme applies only to new Assured Shorthold Tenancy Agreements entered into on or after April 6 2007.
“The penalties for failure to comply with this new legislation are severe and the Courts can order a landlord to pay compensation to their tenant of three times the original deposit.
“Perhaps even more seriously, landlords will not be able to terminate the tenancy using a two-month notice - the routine 'no grounds needed' method of bringing an assured shorthold tenancy to an end.
“Landlords should familiarise themselves with the new legislation and sign up to one of the government approved schemes before entering into any new Tenancy Agreements.”
