Buy-to-let investors have until June 23 to sign up to an official deposit scheme or pay costly penalties.
Thousands of landlords with long-standing tenants could face a £3,600 shock penalty unless they register deposits by this summer.
The Government is running a 90-day amnesty for buy-to-let investors who have yet to put their tenants’ deposits into an official scheme.
Fines for not registering by the June 23 deadline are unlimited and worked out at three times the initial deposit; the average sum tenants put down before moving in is £1,200.
It is thought that up one in three of the 1.5 million private landlords in England and Wales are not registered with a deposit protection service despite legislation enforced in 2007.
Not all of these landlords fall under the scope of the legislation; for example, university lets and licence agreements, an arrangement different to a tenancy that includes lodgers, are excluded.
Any landlord with an “assured short hold tenancy” agreement must register with one of three Government-backed schemes, although Scottish landlords aren’t covered by the legislation.
Hefty penalties aside, landlords who fail to register will also be left powerless if they want a tenant to leave at the end of their contract, because in the event of a dispute the landlord will be seen to have failed their obligations.
• Buy-to-let investing returns 1,400pc in 18 years – what next?Landlords who have had tenants for several years, where the agreement keeps rolling over, are those most likely to be caught, says Emma Humphreys, of solicitors Charles Russell Speechly.
“These landlords may not use a letting agent, which would notify them of the need to register deposits, and may not have been keeping an eye out for the regulations when they were introduced in 2007,” she said.
“Of course, there is no excuse for new landlords not complying with the law. But many long-term buy-to-lets where the tenant and landlord have a good relationship may not realise they need to register with a scheme.”
Such landlords may be unaware that they need to register deposits and may not even have taken a deposit in the first place.
Deposit protection was set up as a compulsory scheme eight years ago to mediate disputes at the end of the tenancy.
When introduced in April 2007, it was unclear if landlords with existing tenants would also need to register, but a court later decided that all tenants – including those who had moved in before this date – should have their deposits protected.
The court ruled in 2013 that tenant Marino Rodrigues, who had moved in a few months before the law came into force, could not be told to move out when his tenancy ended, because the landlord had failed to register his deposit.
The new amnesty – which began on March 26 under the new Deregulation Act – will simplify the “muddied” obligations of landlords, said Richard Lambert, of the National Landlords Association.
“There are now a large number of deposits that need protecting despite not previously needing to be, and it’s likely that many landlords won’t even be aware of what they need to do,” he said.
“Landlords who still hold a deposit should protect it if they haven’t already done so, which will ensure that you can legally regain possession of a property [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][if you need to].”
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