Employer Deposit Loans- A Warning for Landlords

The Mayor of London has launched a new scheme in tandem with Shelter and other employers in London. This is designed to help tenants with their deposit payments in the capital. The scheme works by employers offering their staff interest free loans for their tenancy deposits which they then pay back by way of deductions from their salary.

There is no doubt that this is a good idea and it will help tenants to pay an appropriate tenancy deposit without driving them into the arms of high interest short-term lenders.

However, landlords need to remember that if a deposit is being paid by someone else on a tenant’s behalf by way of an agreement with that tenant then s213(10) of the Housing Act 2004 comes into play. This defines those paying deposits on behalf of tenants as “relevant persons”. Landlords are obliged to serve the information prescribed by the Housing (Tenancy Deposits)(Prescribed Information) Regulations 2007 on relevant persons as well as on tenants. This gives the relevant person key information about the tenant deposit and where it is protected.

Failing to serve the prescribed information on a relevant person can have serious consequences. First and foremost it is not possible to serve a valid notice under s21 of the Housing Act 1988 on any tenant when the prescribed information has not been served on them and on any relevant person. In addition either the tenant or the relevant person (or possibly both of them) can make a claim for the usual financial penalties.

Landlords and agents in London will need to be alert to this new scheme and ensure that they are communicating the necessary information to employers in good time.