Are alternative deposit scheme payments prohibited payments under the Tenant Fees legislation?

February 2, 2022

Tenant FeesThis is a question that has arisen in connection with eviction proceedings being brought on behalf of landlords by insurers.  

The Judge was happy about the paperwork but queried whether the payment for a deposit replacement scheme which had been used was a prohibited payment.  

The case (which was adjourned so no final decision has been made yet) is discussed in an article here.

Why it probably wasn’t prohibited

The law states that a landlord or letting agent cannot require a tenant to make a payment which is not on the list of permitted payments.  

But if the tenant was clearly given the alternative of using the alternative scheme or pay a traditional deposit – this is the tenants choice.  And is allowable.

So, it is argued, the landlord will not be in breach of the law (and so unable to serve a valid section 21 notice).

Preventing the problem

The author of the article, understandably (as he was overseeing an insurance legal and claims dept) made the point that the landlord had the protection of a rent guarantee insurance policy (so was not prejudiced by the delay caused by the adjournment) and was also represented by an experienced legal team.

However, another lesson from this is the importance of keeping proper records.

Proper records

So if you are offering an alternative scheme along with the option to pay a traditional deposit, you need to be able to prove that the tenant was offered an alternative.

Being able to show that the tenant was sent a clear email or letter setting out the options and the advantages and disadvantages of both options is important.  

You should also be able to show that the tenant made an informed choice after having the options explained to him (or her), and given a 14 day cooling-off period.  This will help you if this situation arises for you.

So if the options are explained to the tenant in a meeting – do an attendance note of the meeting and send an email to the tenant immediately afterwards, confirming what was discussed and what was agreed and ask him to let you know if he disagrees with anything.  

Make sure that these records are in a place where you can find them again just in case this issue ever arises for you.

Members will find a FAQ on record keeping here.

Not a Landlord Law member?  Find out more here.
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