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Another tenancy deposit problem ? what happens when the receivers step in?

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

I have been contacted by a landlord who has drawn my attention to a thread on the popular LandlordZone forum:

?Briefly, the rental property has been in the hands of the receivers since July 2008. The receivers accepted the tenancy and collect rent from the tenant (the tenancy is now periodic). The deposit was originally protected by the landlord, however, Mydeposits cancelled the landlord's membership (and therefore the protection) because the landlord was subject to a receivership order, which is contrary to the rules of the scheme.

The deposit has not been paid to the receivers (so it appears they are not liable). The landlord cannot protect the deposit as it's against mydeposits' rules (I guess it's possible the DPS would accept it). Tenant may not succeed in a claim for return of the deposit because the tenancy hasn't ended. So, how can the tenant take action under s.214(1) to ensure the deposit is protected when firstly, the landlord did comply and the cancellation was not his decision, and secondly, the deposit has not been 're-paid' so can there be any duty to comply a second time when the landlord has complied once.

It seems completely crazy to me that the scheme is permitted to cancel a protected deposit in these circumstances - the whole point of the schemes is to protect against landlords/agents' 'bad' behaviour. Landlords cannot unprotect a deposit during a tenancy without evidence of reprotection, so why are schemes allowed to do this??

This does seem to be a difficult situation and one that may become more common with more landlords falling into receivership. What do you think?

Full post as published by The Landlord Law Blog on November 11, 2009 (boomark / email).