Informing Deposits

Ayannuga v Swindells (2012) CA (Civ) 6 November 2012. On Lawtel but not on BAILII yet.

The Court of Appeal has recently ruled on a tenancy deposit protection case regarding the issue of prescribed information. Here T had paid a deposit and L had protected it in one of the approved schemes but he had not given the prescribed information as required by the Housing (Tenancy Deposits)(Prescribed Information) Order 2007. T allegedly fell into rent arrears and L sought possession. T counter-claimed on the basis of lack of compliance with the Prescribed Information Order. L admitted non-compliance with the Order but argued that the requirement was largely procedural, that the purpose of the legislation was to protect deposits (which had been done) and that T could have found out all he wanted to know from the scheme administrator. The lower Court dismissed T’s claim holding that information in the tenancy agreement coupled with the further information provided by L during the hearing was enough to comply with the requirements of the Order.

T appealed. A very heavyweight Court of Appeal (Etherton LJ, Lewison LJ) disagreed entirely with L and the lower Court. It held that the information requirement was not merely a minor procedural one. They were of real importance as they told tenants how they could seek to recover their money and how they could dispute deductions without litigation. The Court of Appeal upheld the decision of the High Court on this issue in Suurpere v Nice (our report here). The lower Court had acted outside the bounds of proper judicial evaluation. L was clearly in violation of the order and the penal;ites of s214, Housing Act 2004 applied. Therefore L was ordered to return the deposit plus a penalty equivalent to three times the deposit.

Appeal allowed.

Discussion
The Court of Appeal has done a couple of important things here:

  1. It has upheld the view of the High Court from Suurpere. The Prescribed Information is not a support to the main purpose of the legislation, protection of deposits. It is a key part of the two elements of the legislation. Mere protection without the information is simply not enough to discharge the landlord’s obligations. In addition, it confirms that landlords must supply that information themselves not leave tenants to go on a hunt to work it out themselves.
  2. Where there is argument about whether the information the landlord has provided is sufficient then the test is as set out by the Court of Appeal in Ravenseft Properties v Hall. That is (with paraphrasing):

    whether, notwithstanding any errors and omissions, the notice is “substantially to the same effect” in accomplishing the statutory purpose of telling the proposed tenant of

    their rights and the procedures operated by the relevant tenancy deposit scheme for recovering their money and contesting deductions.

The upshot is that the Prescribed Information really does matter and landlords need to ensure they have it right. Tenants now have a clear additional means of defending possession actions based on s21, Housing Act 1988 or on rent arrears. While some landlords will be annoyed by this decision it is really the only proper course. Parliament must have intended that the Prescribed Information was of importance because they went to the trouble of setting out in some detail what it had to say. If you also consider that one purpose of the schemes was to remove deposit litigation from the small claims track in the county court then the importance of tenants knowing how to contest deductions without using he court system is obvious.

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Posted in Assured Shorthold tenancy, Deposits, FLW case note, Housing law - All and tagged , .

About David Smith

David is a solicitor specialising in landlord and tenant matters with Anthony Gold Solicitors. He particularly specialises in newer legislation and has written widely on the Housing Act 2004.

26 Comments

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  3. Hurrah, any other decision would have created a reserval to the old law of uncertainty and complete disregard by Landlords to follow due process- how hard is it to draft a prescribed notice setting out how the deposit is held.

    Just wondering if the Tenant got his three times original deposit amount as compensation!

    • The judgment is correct in law, but the law is ill-conceived.

      It is not just a ‘notice’ as frednach suggests. In order to comply with, say, the Deposit Protection Service’s requirements, the landlord must fill out a four page template, (which includes providing the tenant with his own name, address and phone number), plus provide a copy of the DPS’s T&C, which are 11 pages long.

      He must then give the tenant the ‘opportunity’ to sign the prescribed information (under paragraph 2(1)(g)(vii)(bb) of the 2007 Order). (May we look forward to a judgment imposing a sanction for failing to provide this ‘opportunity’?)

      If the tenant refuses to take up this opportunity, the landlord must ensure that he obtains some form of evidence that he has given the tenant the opportunity, and evidence that he has provided the information to the tenant.

      All of the schemes send the tenant confirmation of the registration of the deposit and provide the tenant with an ID code. This should be enough; it is not unreasonable to assume that the average tenant has the wherewithal to seek further information from the scheme if necessary, just as there exists an assumption that the tenant will read through 15 pages of information (which of course he won’t; in the event of a dispute a year later, he won’t even remember that he was given the information, or where he put it).

      • It really annoys me when some landlords moan about this legislation as ‘unnecessary’.

        Having been both a tenant and a landlord, I know that the system was often abused by landlords, which then led to smarter tenants using their deposit to pay their last months rent, purely to avoid such abuse.

        The new schemes offer a level playing field. If that means more paperwork for the landlords (quite simple paperwork, once all aspects of the landlord compliance are completed) then so what? It’s still way better than working for a living.

        So landlords, would it not be better than grumbling, to simply comply or find other ways to invest?

        • “It really annoys me when some landlords moan about this legislation as ‘unnecessary’.”

          No doubt it does, but if you read my comment, I did not state that the legislation was unnecessary, but that it is ill-conceived, particularly in respect of the PI.

          In Ayannuga v Swindells, the landlord had protected the deposit, given some of the PI in the tenancy contract, and the tenant would have been informed, by the scheme, of his ID number (and thus which of the schemes was protecting his deposit). All that was apparently missing was the scheme’s leaflet advising on the procedure for reclaiming the deposit.

          I do not believe that failing to provide a leaflet justifies a draconian financial penalty, let alone the hours of court time which have been spent on this case.

          Yes, it’s the landlord’s fault for failing to provide the leaflet. But it is not, as everybody claims, all that simple to comply.

          Each scheme has different rules, e.g. The Dispute Service requires clauses to be inserted into the tenancy contract. It is not very surprising that landlords are sometimes getting it wrong, when there is no standardized approach to compliance with PI. Landlords have to negotiate reams of information to find the relevant material (The Dispute Service’s guidance on PI is 21 pages long)and rarely are the sanctions under HA 2004 for failing to fully comply with PI emphasized, nor have I ever seen a reference to the 2007 Order on a scheme website.

      • The template provided by the DPS is not mandatory but an example of how to provide the P/I. It can easily be adapted to fit on one sheet of paper. The DPS T&Cs are in fact 6 pages and can be printed on 3 sheets of paper (the remaining 5 pages are details of the amendments made by the DPS to accommodate the 2012 change in the law – goodness knows why they are included, but they don’t have to be given to the tenant as part of the P/I).

        How many pages is your tenancy agreement? Is it really such a burden to give a tenant 4 more pieces of paper? Maybe the law is stupid and unnecessarily bureaucratic, but it’s the law and it’s not hard to comply. So just do it, then campaign for it to be changed to something more sensible and practical.

        There is quite an incentive – avoiding a potential penalty of 3x the deposit, and having to return the deposit.

        It is quite irrelevant that the tenant won’t read the P/I and will lose it before it is needed, and can easily get it elsewhere anyway. You’re not doing it primarily to help the tenant but to comply with the (stupid) law and protect yourself.

        • Just to clarify, the PI is not just DPS’s template – the full DPS terms & conditions are required too. However, I do agree that in the grand scheme of things, printing off 14 sheets of A4 is hardly a burden – I’ve just knocked out a couple of hundred for a forthcoming court hearing.

          • “… the full DPS terms & conditions are required too.”

            Agreed – as the template makes clear in the notes (and as my version also makes clear) – but you would be surprised (or perhaps not) how many people, including professional letting agents, get this simple step wrong.

            I can get all the P/I (inc T&Cs) on 4 sheets of A4, and still printed legibly. Doing this every time is, IMHO, a lot less of a burden than dealing with just one section 214 claim!

    • This case was decided under the old legislative scheme (i.e. pre the Localism Act changes) – so the court had no option but to order 3x the amount of the deposit as statutory damages.

      As far as I am aware, we are still yet to have a reported decision that gives any indication as to how the courts should exercise their new discretion under s.214(4). There was some mention in the little I have seen from the Parliamentary debates on the changes that the lower amount should be awarded where the LL’s breach was “de minimis” / accidential and immediately remedied when he became aware of his breach. Whether the courts will take a LL’s conduct into account (be that conduct spuriously withholding sums from the deposit or, for example, spuriously counterclaiming to set off his liability for statutory damages) remains to be seen.

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  6. “If you also consider that one purpose of the schemes was to remove deposit litigation from the small claims track in the county court then the importance of tenants knowing how to contest deductions without using the court system is obvious.”

    Judging by the number of queries which appear on the landlordzone forum relating to how to claim against the landlord for failing to comply with deposit protection requirements, what is obvious is that the legislation is serving to replace one form of claim with another.

    “Tenants now have a clear additional means of defending possession actions based on s21, Housing Act 1988 or on rent arrears.”

    Thus increasing the burden on the court system.

    • Hi Westminster.

      the actions you speak of, would not be possible if landlords comply with the new legislation. In short, the power is in the hands of the landlords – by following simple rules, they are still covered with the deposit and, given that tenants know their deposit is ‘safe’, everyone should be feeling better about this contentious area.

      I’ve even had agents go bust on me and have lost deposits. It’s not just the landlords/tenants.

  7. What about the following scenario.

    Tenancy moves in prior to April 6th 2012, deposit entered into scheme but prescribed info not sent.

    The AST is re-newed 5th April 2012 and is now on-going and the prescribed information not resent on or after the 6th April.

    Would the land lord or agent be liable?

    Cheers,

    • Landlord is liable – that’s the way the law of agency works. Having said that, the landlord could subsequently sue the agency for his losses.

      • I am sorry Dave R but that is not quite correct. The standard law of agency does not apply here. S212 of the Housing Act 2004 states that wherever the part of the Act dealing with deposits mentions landlords you can equally well insert “any person acting on the landlord’s behalf”. In other words an agent. This position was endorsed by the High Court in Draycott v Hannells. Nothing in the Localism Act changes has altered this position. Therefore, an agent is just as liable as a landlord is and a tenant can sue either or both

        • Sorry, you are right – however that does not mean the landlord is NOT liable if the tenant chooses to pursue him or both the LL & agent.

          • I understand that the majority of landlords (personally the landlord not the letting agent) have not complied with the DPS legislation – The Prescribed Information (Tenancy Deposits) Order 2007 – statutory instrument number 2003. This information has to be issued by the LANDLORD PERSONALLY and not the agent and signed in full agreement by both the landlord and by the tenant. The Prescribed information is:

            contact details of the scheme administrator where the deposit is held;
            information provided by the scheme administrator to the landlord explaining the requirements of the THE HOUSING ACT 2004 in relation to deposits;
            the procedures for recovering the deposit at the end of the ten­ancy, including the procedures applying if either the landlord or tenant cannot be contacted;
            the procedures applying where there are disputes about the amount to be returned and the facilities available for resolving disputes;
            information about the tenancy and the deposit: the amount paid, the address of the property, and the contact details of the land­lord and the tenant which will be used by the administrator of the scheme at the end of the tenancy;
            the circumstances in which all or part of the deposit may be retained by the landlord;
            confirmation by the landlord (personally – not the letting agent) that the information given is accurate to the best of his or her knowledge or belief and that he or she has given the tenant the opportunity to sign to confirm that the infor­mation is accurate to the best of the tenant’s knowledge and belief.
            (Directing tenants to a website to “plug in the gaps” is non-compliant with the legislation).

            The PERSONAL responsibility is placed upon the Landlord and not the agent – see paragraph 50 ofThe Hon. Mrs Justice Cox’s ruling in Suurpere v Nice & Nice
            http://www.bailii.org/ew/cases/EWHC/QB/2011/2003.html

            • I don’t think that is right. The responsibility is placed on the landlord, but that doesn’t mean an agent can’t do it in the landlord’s place. Para 50 of Suurpere doesn’t say that it must be the landlord, not the agent. S.212 Housing Act 2004 (as amended) allows for ‘landlord’ to mean anyone acting on their behalf in the relevant sections, and there is a clear argument that this also extends to the prescribed Information Order

  8. “Tenants now have a clear additional means of defending possession actions based on s21, Housing Act 1988 or on rent arrears.”

    Thus increasing the burden on the court system.

    those pesky tenants, always wanting to stay housed instead of being evicted…as stated above by others, if a landlord makes sure they have complied with the regs, then they have nothing to worry about.

    it is not a tall order to expect those who are in a certain line of business to understand their responsibilities in that line of business.

    • “it is not a tall order to expect those who are in a certain line of business to understand their responsibilities in that line of business.”

      Many landlords are ‘accidental landlords'; people who cannot sell their property but have been obliged to move due to circumstances. These are the people who are most likely to mess up and be ordered to pay 3x the value of the deposit for failing to provide the T with a *leaflet*, not professional landlords like me. (It’s a very nice little earner for ‘professional’ tenants, though).

      I have just replied to a poster on the landlordzone forum regarding protection of a deposit (received last week) with MyDeposits. He had immediately protected the deposit, and confidently asserted that the MyDeposits’ certificate provided all the prescribed information. Well, yes, except for articles 2(1)(g)(vi), 2(1)(g)(vii)(aa), and 2(1)(g)(vii)(bb) of The Housing (Tenancy Deposits) (Prescribed Information) Order 2007, but obviously this hadn’t been made clear enough by MyDeposits. This landlord, even with the best intentions, wouldn’t have known unless he’d asked a related question on a landlord forum.

      Also, I challenge you to read MyDeposits’ rules and tell me whether or not, and in what circumstances, they will unprotect a deposit if the landlord goes bankrupt.

      None of the deposit schemes’ rules appear to have been drafted by a someone who has methodically addressed and considered every situation (as well as the, er, legislation); it’s all incredibly hit and miss.

      In addition, post-Housing Act 2004, we now have situations involving the legal non-entity of a ‘lead tenant’ who is ‘in charge’ of the deposit. A recent thread on landlordzone highlighted the problem of a lead tenant who agrees to deductions (without the agreement of the other joint tenants), and pockets the full balance refunded. Yet another case for the courts to resolve… So much for reducing the burden.

  9. Can anyone provide me with the statistics of how many deposit legislation related claims have been brought by tenants who are NOT in arrears?
    Perhaps a codicil to the Act stating that rent accounts should be up to date prior to any initiation of such a claim would have a greater effect in reducing the stress on Small Claims Court…?

    • MM No, nobody has those statistics, although I personally know of some.

      And you appear to have no quite grasped either the operation or the point of the scheme. It is a part 8 claim, so not small claims court. And there is nothing stopping a landlord from counterclaiming for arrears, but the landlord’s breach happens at the start – failing to protect or provide prescribed information within 30 days. The landlord’s breach of the deposit scheme rules and the tenant’s breach on rent are not connected.

      • NL, I agree entirely that it is a Part 8 claim (multi track), but I have seen plenty of anecdotal evidence of the courts allowing it through on part 7 & allocating it to small claims.

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