A recent blog post on the PainSmith blog illustrates a potentially nasty trap for letting agents (and useful alternative target for tenants) in the tenancy deposit protection system of the Housing Act 2004.
According to PainSmith a let-only agent received a deposit from the tenant and passed it on to the landlord who failed to register the deposit within the 14 day deadline.
The tenant has now brought proceedings for 3 times the deposit against the agent as well as the landlord, arguing that s.212(9)(a) of the Housing Act 2004 defines “landlord” to include persons acting on a landlord’s behalf and therefore the penalties in s.214 of the act apply to the letting agent as well as to the landlord.
I have always thought this argument must be right. Indeed it goes a little further than that.
S.213(1) requires that when a deposit is paid to “a person”, it must, from the time that it is received be dealt with in accordance with an authorised scheme. The “person” could be anyone (as in “leave it with the lady next door dearie”) and the date of receipt starts the 14 days ticking.
2.212(9)(a) is quite clear. It states:
references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies
This would appear to mean that the duty to give information to the tenant (and any “relevant person” such as a relative paying the deposit on behalf of the tenant) under s.213(5) also falls on the letting agent. As well as implying (as the tenant in the case reported by PainSmith contends) that a letting agent can be ordered to pay three times the deposit as a penalty under s.214(4).
That view is buttressed by the fact that s.214(3) permits the court to order the “person who appears to the court to be holding the deposit” to repay it to the tenant – that person need not be the respondent to the application nor a landlord or letting agent. The scheme is clearly intended to permit the courts to do actual rather than merely formal justice.
Finally if I am right then the likelihood is that letting agents will insist that they take charge of ensuring that any deposits paid to them are held in accordance with one of the approved schemes. That can only be a good thing. It is hard to see why a landlord would have a legitimate reason for wanting to prevent an agent from doing so.
Thus, the long run effect might be to put letting agents in a stronger position when dealing with landlords, to the benefit of tenants and letting agents both. Of course in the short run this is not good news for any letting agents who have left responsibility for the deposit with the landlord and legal uncertainty is a bad thing.
For tenants, the lesson is that if you paid your deposit to a letting agent you may have another target for complaint if the deposit is not properly protected.
[For all tenancy deposit case posts click here]