Serving a section 21 and the return of a security deposit

Serving a section 21 and the return of a security deposit

If the landlord or agent has not protected the security deposit within 30 days of receipt of the funds, they would be in breach of deposit legislation, and would be required to return the security deposit back to the tenant minus any agreed deductions. Otherwise not only would they be in breach of the regulations but they also could not issue a section 21 notice whilst the security is either unprotected or protected outside the 30 days.

There has always been an understanding that if the security deposit was returned back to the tenant by serving a section 21 and the return of a security deposit via the scheme or indeed in the form of a cheque, that the deposit was deemed as being returned. It would be the tenant’s responsibility to either log in to the scheme and accept the return or cash the cheque, as the funds were readily available to them. This was a decision in the Yeomans v Newell case.

There has been a recent case, Gul v Bilal, where the landlord has served a section 8 based on grounds 8,10,11.As well as serving a section 21. The tenant made a counterclaim for disrepair and a breach of the security deposit requirements.

The landlord had attended the property whilst the tenant was present and had left a cheque to the sum of the security deposit on the kitchen table. The tenant had confirmed he had never wanted or cashed the cheque.

With this in mind the judge decided as the landlord had not confirmed in writing why he gave the tenant a cheque and the tenant did not accept the cheque that the security deposit was not returned and the section 21 notice could not be relied on for possession.

Whilst this creates a conflict with the Yeoman v Newell case, both are only County Court cases so not binding on other courts. However, it does show the importance of following deposit legislation and making sure the deposit is refunded, and accepted, before serving the section 21.