If you do not protect the deposit within one of the three statutory schemes within 30 days’ of taking the deposit (or from the start of the tenancy, whichever the sooner) you cannot use Section 21 to end the tenancy, unless one of the following things has happened:-
- You return the deposit in full to the tenant/s (documentary evidence required), or,
- You agree with the tenant/s that you can make deductions from the deposit and you return the remainder to them (any such agreement should be in writing), or
- You are ordered to pay the penalty by the Court. This must be done through a Court order not by private agreement as a private agreement to pay a penalty is not enough for this purpose. You could agree through the court on the amount for the penalty for that purpose. This is usually in response to a claim made by the tenant against the landlord so would usually be instigated by the tenant rather than the landlord.
If you have protected the deposit but not given the prescribed information with 30 days the position is different. You lose your Section 21 rights at any time when the information (and the tenants leaflet) has not been given, but you can regain your Section 21 rights by giving the prescribed information (and the tenant/s leaflet) to the tenants/s and anyone else who has paid towards the deposit. However, you will still have to pay a penalty if the tenant/s claims it. Once you have done one of the above you can serve a valid section 21 notice.
Where a deposit taken for an assured shorthold tenancy before the 6 April 2012 has not already been protected in one of the government authorised schemes, the landlord or agent would have needed to protect the deposit within 30 days of 6 April 2012. If the deposit was not protected within that 30 day period the deposit would be subject to the above remedy requirements.
The alternative to the above is use the rent arrears ground for possession if they are over 2 months in arrears, but this will throw up its own problems as the penalty you could be liable for may effectively ‘wipe out’ the arrears or bring the arrears balance to below 2 months of arrears.
Read further information about each of the schemes as below: