Just a quick note to say that Housed has a report on a County Court judgment on a claim for failure to put deposit in scheme and notify tenant within 14 days. (Stankova v. Glassonbury 10th March 2008, Gloucester County Court. Initial report apparently via Consumer Action, no reference or link)
Result - mandatory 3 x deposit award, with no set off against arrears (because mandatory). It didn’t matter that the landlord had very belatedly put the deposit in a scheme, or that the tenant had left after s.21 notice, or that that the landlord raised deductions from the deposit at Court. The court was apparently persuaded that deductions were irrelevant on the basis that a statutory scheme included arbitration for disputes about returning or retaining deposit monies. Apparently the DJ wasn’t happy making the award but found he could do no other.
There is an unaddressed issue about validity of an s.21 Notice, as the tenants had moved out.
Thanks Housed. Useful stuff for many tenants.
There is an interesting contrast betwen this judgement and article just posted to Property Law (subscription website) -”Tenancy Deposit Schemes”. That article suggests landlord may escape sanction if s/he complies before hearing.
Who is the article by?
I’d admit that I wasn’t clear on this point myself, although I’d have thought the landlord would have a stronger case if they complied before issue, rather than hearing. We appear to have a County Court judgment that late compliance makes no odds, but I would like to see an authoritative judgment, otherwise, it may be a lottery by District Judge. Given the nature of the beast, this higher court case is unlikely to happen, though.
There is support for the view that Parliament intended that the sanction of payment of three times the deposit would only apply where the landlord has not complied by protecting the deposit before the hearing. Para 84 of the Explanatory Memorandum to The Housing (Tenancy Deposits)(Presribed Information) Order 2007 says “If a landlord has not complied with the Act by the time of a court hearing, the court must order him to pay to the tenant an amount equivalent to three times the deposit”. This seems to make more sense and avoids a substantiall windfall for the tenant where the deposit is protected and there is no loss.
Michael,
Certainly it is an arguable point, although that would leave the landlord free to not use a deposit scheme right up to the point of being notified of a hearing date, with no penalty (save the s.21 notice validity, which itself would only be an issue for possession proceedings). But Stankova was a first order County Court judgment and therefore not binding in any way. No doubt other decisions will go otherwise.
If the deposit is not protected as sson as practicable (with a 14 day grace period) after being collected then the tenant’s money (his deposit) is at risk due to insolvency or whatever of the landlord or agent. So “protecting” it before a hearing is not the comprehensive protection that tenants should expect. The late “protection” does make the deposit subject to arbitration - but that is small consolation.
Both fair points, but if the landlord (although probably not the holding agent) becomes insolvent before the hearing and the deposit is lost, then presumably the penalty itself would also be academic (although it looks like a fine, it is civil, being payable to the injured party). Hopefully the courts will give some guidance as to what the legislation means, but I wonder if it might not have been better to have provided for the tenant to be able to comply with the tenancy agreement simply by paying the deposit directly into one of the authorised schemes.
I agree that the penalty would be academic if the deposit holder became insolvent - but surely the point of the legislation is to protect the tenant’s cash. The chosen route of doing that is to force the landlord to protect it as soon as practicable - within 14 days. And that in itself is quite reasonable and offers a high level of protection as the money is at risk only for 1/12th of the term of say a 6 month AST. If the legisaltion does not in practise force the landlord to protect it in a timely fashion then the legislation is flawed, not the argument.
In fact, if landlords can legitimately escape the need to protect until they want to issue a Section 21 notice, there is an argument for saying that the whole industry of “deposit protection” will collapse through lack of business.
We are a reputable lettings agency who have always been scrupulous about tenant’s deposits and the trouble this protection business causes us is immense. We are helpless in the face of a tenant who says “use my deposit for the last month’s rent” (we don’t have it, it is in the DPS scheme and we cannot institute a single claim process until 14 days after the tenancy ends. If we ask the tenant to co-operate in returning the deposit before teh end of the tenancy we are accepting that they are breaching the tenancy agreement which disallows the tenant the use of the deposit for the last month’s rent and that sets entirely the wrong tone for managing the tenancy). Tenants who abandon the tenancy early are just as bad. Again we have to wait for 14 days after the formal end of the tenancy however created. Tenants who die are marginally better if the family of the deceased can find the paperwork and are co-operative.
This is a problem I flagged up at an early stage. The legislation is clearly drafted and, as drafted, only permits the court to impose the 3 x rent penalty if the landlord is in default at the time of the hearing.
s.215(3) strengthens this conclusion: if the landlord has already paid the money into a scheme, it would be rather odd for the court to have a power to order the landlord to pay the deposit into the custodial scheme (leaving 2xdeposit protected).
Yes, this means that a cynical landlord is able to abuse the system. There are two caveats to that:
1. Any s.21 notice will take just that much longer (since the landlord will have to first comply with the requirements and then serve the notice).
2. If the tenant does sue and the landlord then complies, the tenant ought to get their costs.
Mind you, clear wording of a statute has never stopped courts from avoiding it to do something they consider “better”. Its quite possible that the courts will decide that (contrary to their drafting) the TDS was intended to provide a much greater protection and that, having failed, a landlord will be permanently at risk of the 3 x deposit fine.
It will be interesting to see.