Following a series of court cases the coalition Government have passed legislation that changes the rules. The Localism Act 2011 has been used to amend tenancy deposit protection legislation and, make no mistake, the changes are not for the better for landlords and agents across the land.

Most of the Localism Act is about transferring powers from central Government to Local Government. Most widely reported are the changes to planning law with the abolition of top down targets for building to be replaced by incentives for councils who build new homes.

Buried deep within the act in section 184 is a single section making changes to deposit protection. Small it may be, but it is also very significant.

As drafted the legislation allowed landlords 14 days in which to protect the deposit and to give the prescribed information. The penalty of three times the deposit was carefully drafted to make sure the penalty was not attached to the time span, but to the failure to protect or give the prescribed information.

The changes that will come in through the Localism Act as passed will change the 14 days to 30, in itself good news. However, whereas the previous wording attached the penalty to the failure to carry out the action, the new wording attaches the penalty to carrying out the action within the specified time scale.

This will mean that if for any reason the deposit is not protected or the prescribed information is not given within the 30 days, the tenant will be able to apply to the court for a penalty and if the facts are true the court have no discretion and have to award a penalty. Considering the potential for errors in the prescribed information, this is a truly shocking situation that will cost the unwary thousands of pounds.

The current rules say the penalty has to be three times the deposit, however when the Localism Act comes into force this is amended to not less than the value of the deposit and not more than three times the deposit. Any flexibility is good news but even a penalty equal to the deposit would be a sizable loss for what could be a totally innocent oversight or misunderstanding.

Following the Gladehurst Properties v Hashemi case the court decided that once the tenant had left the property they were not able to seek the penalty from the landlord. The Localism Act addresses this very directly by adding in a clause clearly stating that the tenant can apply for the penalty even after they have left the property.

Whilst undoubtedly introduced with good intentions, these changes have the potential for serious consequences. If over a period of years a piece of information was omitted from the prescribed information, every past tenant could claim a penalty of three times the value of their deposit for each tenancy and renewal. The sums involved could be seriously eye watering!