Tenancy deposits: buyer beware

30 Mar 2017

All landlords should be well aware of their obligations to place a tenant’s deposit in a government-backed tenancy deposit scheme. If they fail to so, the Courts can order them to pay the tenant up to three times the deposit. But fewer landlords may be aware that they can inherit liabilities to do with protecting deposits when they buy a property.

In Baptiste v Barham (2015), a landlord was ordered to pay one times the deposit to the tenant, as the deposit had not been protected within the required timeframe. The landlord had bought the property subject to the tenancy agreement in 2007. The tenant had paid a deposit when the tenancy was first granted in 2004 but the deposit was never protected. When the landlord bought the property, he renewed the tenancy, but also failed to protect the tenancy. Years later, a section 21 notice was served in order to take back the property at the end of the tenancy. But the landlord had to stop possession proceedings when the tenant raised as a defence the fact that the deposit had not been protected in a government approved scheme as required.

The tenant claimed for a financial penalty and the Court accepted that the landlord had acquired the obligation to protect the deposit and therefore ‘inherited’ the liability for failure to protect the deposit when he bought the property.

The case highlights how important it is that buyers acquiring residential properties with tenancy agreements check carefully whether the tenancy deposit rules have been followed. Otherwise they may face liability for financial penalties. In ordering the landlord pay one times the value of the deposit to the tenant, the Court recognised that the landlord was not a professional landlord and had not had a flagrant disregard of the rules. However the Court does have the discretion to order up to three times the value of the deposit. Ultimately, whatever sum ordered by the Court, such a claim is going to be a costly and time consuming battle for a landlord.

The case is a reminder of the caveat emptor rule - buyer beware. Buyers acquiring property subject to residential tenancies should always take specialist legal advice.

Further reading

Remote working and home security

Blog, News & PR
With a large proportion of the workforce now working from home, security arrangements for home workers need to be addressed - Robert Ganpatsingh explains
Read more Read

Tenants take note: dilapidations damages to be subject to VAT

Blog, Legal Updates
Property expert Cheraine Williams explains why dilapidations could be about to get more expensive
Read more Read

Covid business interruption insurance payments due to small and medium companies

Blog, Legal Updates
Partner Jonathan Compton looks at the Supreme Court’s decision on business interruption insurance
Read more Read

DMH Stallard’s corporate team shortlisted for four awards

Blog, News & PR
Current Corporate Law Firm of the Year hoping to hold on to the title in 2021
Read more Read
  • Brighton Office

    1 Jubilee Street


    East Sussex

    BN1 1GE

  • Gatwick Office

    Griffin House

    135 High Street


    West Sussex

    RH10 1DQ

  • Guildford Office

    Wonersh House

    The Guildway

    Old Portsmouth Road



    GU3 1LR

  • Horsham Office

    Ridgeland House

    15 Carfax


    West Sussex

    RH12 1DY

  • London Office

    6 New Street Square

    New Fetter Lane


    EC4A 3BF

  • Get in touch