The severity of tenancy deposit penalties

As a landlord, it’s essential that you correctly protect a tenant’s deposit in order to avoid penalties for not doing so. The severity of tenancy deposit penalties depends on a number of factors.

Under Section 214 of the Housing Act 2004, a tenant can apply for an order from the Court where the landlord has:

1. Failed to correctly protect the deposit with an authorised scheme within 30 days;
2. Failed to provide the prescribed information to the tenant within 30 days.

If the landlord is found to be in breach of the duties detailed above, the Court will require the landlord to return the deposit and it has the discretion to award between one and three times the amount of the deposit in compensation, for each breach.

What are the factors used to calculate tenancy deposit penalties?

When seeking to decipher the appropriate multiplier, the court will consider various factors including the landlord’s experience and behaviour. There are certain factors that can lead to higher awards being applied, and certain factors that can result in a lower penalty.

Where the landlord has acted in deliberate and multiple breach of their tenancy obligations, as in the case of Mason v Olivera and Santana [2023], the Court may impose the maximum penalty. In that case, the landlord failed to protect the deposit during both the original tenancy and a subsequent statutory periodic tenancy, together with other non-related breaches rendering the property to be unfit for habitation. The Court awarded three times the deposit for each breach, resulting in a total award of £6,600, from the deposit initially paid of £1,100.

Another aggravating factor the Court often considers is the landlord’s level of experience. If the landlord owns multiple properties or operates on a professional basis, the Court is likely to hold them to a higher standard of knowledge and compliance. This can make a higher award more likely.

In contrast, the case of Davies v Scott [2019] is an example where mitigating factors led to a lower award. In that case, the landlord had joined a deposit protection scheme but failed to actually protect the tenant’s deposit. He claimed to have been unaware that the rent threshold for high-value tenancies had changed in 2010 such that he believed that this tenancy was exempt from the deposit rules. The breach appeared to be careless rather than malicious, although it was considered that the landlord had failed to correct the error once it had been noticed, and the Court decided to award a moderate penalty of 1.5 times the deposit per breach as a result.

Other mitigating factors may include situations where the deposit was protected late, but ultimately registered before proceedings were issued. Courts generally take a more lenient view where a landlord has made an honest mistake and taken steps to rectify it. In contrast, landlords who ignore their obligations and fail to engage with the issue are less likely to benefit from the Court’s discretion.

Tenancy deposit protection obligations are more than a technicality and are taken seriously by the Courts. Landlords should be aware of the factors that the Court will consider in order to mitigate their chances of receiving a harsher penalty.

If you are a landlord facing a deposit protection claim or you are a tenant who believes their deposit was mishandled, please get in touch.

As specialists in landlord and tenant matters, our property disputes team keep up to date on all changes to the law, ensuring that we give the best advice and can help to resolve any issues landlords have.