Can a landlord return a deposit by cheque?

When commencing possession proceedings under a section 21 notice, various conditions imposed on the landlord must be complied with. For instance, the prescribed information must have been given to the tenants prior to serving the notice, along with gas safety certificates (if applicable) and the deposit protection certificate.

For any assured shorthold tenancies that commenced after 6 April 2007, it became a requirement for the landlord to place the tenant's deposit in a government-approved tenancy deposit scheme (TDP). The time limit to do so has altered since but currently stands as within 30 days of payment.

Failure by a landlord to protect the deposit at all or outside of the time limit can lead to detrimental consequences for the landlord. The tenant can claim up to three times the deposit amount, which will most likely hinder possession.

Therefore, a landlord needs to comply with the conditions imposed before serving notice and be able to evidence the same.

If the deposit was not correctly protected, the best course of action is to return it to the tenant as quickly as possible. If the landlord holds the tenant's bank details, this can be relatively quick and painless. However, the tenant may refuse to supply their bank details to protect their position against possession proceedings.

Advice for landlords

A recent county court appeal judgement (Richworth Ltd v Billingham (2023) EW Misc 8 (cc)) raised the issue of whether a cheque being given to or left with the tenant could be considered as the deposit returned.

Although the judgement did not amount to a definitive decision, it has provided some clarification on the circumstances which would constitute a return of the deposit by cheque.

In short, the landlord cannot wholly reply on the deposit being returned by cheque. Tenants, on discovery of the cheque, can notify the landlord that it is not accepted and that the deposit is not effectively returned.

Advice for tenants

Equally, tenants are unable to wholly rely on not cashing the cheque. If a tenant delays their announcement of non-acceptance until they file a defence to possession, the court may hold this as implied acceptance by non-communication.

In conclusion, although returning it is an option, it should not be considered best practice for a landlord to return a deposit by cheque. There are circumstances where it can be deemed as returned, but these are reliant on an omission of action over a period of time. It does not coincide with the landlords' desire to regain possession as quickly as possible.

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