Hat tip to Tessa at Landlord Law for this. There are reports on various tenant/landlord forums of tenants losing Housing Act 2004 claims for 3x deposit on unprotected deposit/lack of notification cases where the landlord has returned the deposit to the tenant prior to hearing. Here’s an example.

This approach relies on the wording of s.214, specifically:

(2) Subsections (3) and (4) apply if on such an application the court—
(a) is satisfied that those requirements have not, or section 213(6)(a) has not, been complied with in relation to the deposit, or
(b) is not satisfied that the deposit is being held in accordance with an authorised scheme,
as the case may be.

(3) The court must, as it thinks fit, either—
(a) order the person who appears to the court to be holding the deposit to repay it to the applicant, or
(b) order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme,
within the period of 14 days beginning with the date of the making of the order.
(4) The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

[My emphasis]
The issue is the ‘must also’ at (4). The argument runs that if the court cannot order either (3)(a) or (3)(b), because the deposit has already been returned to the tenant, that ‘also’ means that (4) cannot follow or be ordered separately.

That is quite a nifty argument, at least on the strict construction of the Act, although it runs against the purpose. It has clearly had some successes, again all at County Court level, so no binding precedent. And it leaves the landlord able to avoid penalty by returning the deposit at any point up to the door of court.

But – in strictly thinking aloud terms – I’m not so sure it is so clear cut, at least assuming that the tenancy is still in existence.

What if the tenancy agreement specifies a deposit? Or even where, if the deposit was taken as a condition for granting the tenancy agreement, there is arguably an implied term that there is to be a deposit? The tenant would be in a position to argue that the return of the deposit is not the correct result and that the deposit – which is a contractual requirement of the tenancy – should be protected. It would be open to the tenant to refuse the ‘return’ of the deposit as a breach of contract. After all, a deposit is arguably in the tenant’s interests as well as the landlord’s.

On this line of thought, the tenant should tactically claim for an order that the deposit be protected, not return of the deposit, and claim for the 3x penalty, and then refuse any ‘offers’ by the landlord to return the deposit.

If the landlord then does protect the deposit, the case faces the lottery by District/Circuit Judge of whether late compliance avoids the penalty. Some say it does, some say it doesn’t.

Or are these just the fevered imaginings of a broken mind? It has been a trying couple of days.

For a piece of statute supposedly aimed at lay people, these parts of the HA 2004 must now be in the running for the worst drafted in recent times. We need appeals on all these issues, and soon. High Court or preferably Court of Appeal.

[For all tenancy deposit case posts click here]