Bits from August LAG 1: Tenancy Deposits

As ever, the lovely Legal Action housing updates have some interesting County Court cases that hadn’t reached us. A couple in the August edition concern tenancy deposit cases. Nothing binding (and when will some of these cases reach a higher court?), but interesting.

Woods v Harrington, Haverfordwest County Court. 19 May 2009. Ms Woods had a 12 month AST from May 2008. The tenancy agreement stated that there was a £600 deposit ‘as security for the faithful performance of the terms of the lease’. The deposit was not paid into a scheme. During the 12 month term, Ms Harrington, the landlord agreed to accept notice to terminate the tenancy early and possession was given in March 2009. The deposit was not returned. After two weeks, Ms Woods issued proceedings for the return of the deposit, without warning. Ms Harrington counterclaimed for damage and paid the deposit into a scheme in April 2009. At trial, the DJ noted that the requirements of s.213 Housing Act 2004 had not been met during the life of the tenancy. The late payment was made in the hope of avoiding the repercussions of s.214. This was not only contrary to the letter of the law but its spirit and the public policy it embodied. Parliament could not have intended that a landlord could ignore the legislation then avoid its effects by late compliance after the end of the tenancy. Return of the deposit and 3 times deposit payment ordered and directions given on landlord’s counterclaim.

This is one of a number of cases now where the County Court judges have taken the view that late compliance is not sufficient, in this case specifically compliance after the end of the tenancy. It is still a lottery, of course.

Delicata v Sandberg, Central London County Court. 2 June 2009. Ms Sandberg was granted a 12 month AST in July 2007. The deposit was not protected until August 2007. The landlord had served a s.21 notice on the same day the tenancy agreement was signed. In April 2008, Ms Sandberg was sent to prison. She had notified the landlord in advance. While she was in prison and without warning to her, the landlord issued accelerated possession proceedings relying on the s.21 notice from July 2007. A possession order was obtained and then in April 2009 a warrant of possession, both while Ms Sandberg was in prison and without her having been served with papers there. She returned to the flat on her release in May 2009. The landlord applied for a warrant of restitution. At court, the DJ accepted that the possession order should be set aside. The landlord could not rely on a s.21 notice served while the deposit was not protected – s.215(1) Housing Act 2004 – as it was invalid.

This may be quite an extreme case, but confirms what we have always said. A s.21 notice served with the tenancy agreement is invalid unless the deposit has been received and protected beforehand, which is unusual.

[For all tenancy deposit posts, click here.]

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Assured Shorthold tenancy, Deposits, Housing law - All and tagged , , , .

26 Comments

  1. Pingback: The Landlord Law Blog

    • This bit is interesting:
      “However, it is clear that where a landlord and tenant enter into two successive tenancy agreements and the
      landlord retains deposit monies from one tenancy to the next the landlord will be deemed to have “received” those
      funds for the purposes of the scheme and will be liable should he fail to protect them within 14 days, even where
      he seeks to argue that the monies were retained as rent in advance (see Piggott v Slaven, Great Grimsby County Court and Saad v Hogan, Brentford County Court, both February 2009).”

      What if the landlord registers the deposit very late (therefore not really complying)…. will a subsequent s.21 then be valid???? I’m wondering if it’s best for tenants not to sue for the 3x…. then maybe the s.21 can never be valid… but not sure. I’ve noticed that the different deposit schemes have in their terms that they won’t accept after 14 days or that the still do but it doesn’t comply with the regulations (or that they only accept during fixed term and not periodic).

    • There’s nothing in the act that creates a deeming provision for successive tenancies, nor any hint that such a rule should prevail. One cannot cite county court decisions as precedential much as one might like to. It is simply an error.

    • The government guidance says the same about successive tenancies, apparently, and that such deposits need to be protected.

    • And some county courts have said the same, but Francis is right, none of this amounts to a binding precedent. And until a higher court has a go at it, it is open to a county court judge to find otherwise, given that the Housing Act 2004 itself is not clear on the issue.

  2. Most of these cases are heard by District Judges and they need to reach the higher courts. There is an “easy” way; a leapfrog appeal direct to the Court of Appeal – see CPR Rule 52.14 on the basis that it would raise an important point of principle or practice. I succeeded with little difficulty in obtaining such an order, only then to run out of funding. If you lose and have funding, go to the court of Appeal!

    • I am currently getting about 4 cases a week now of both landlords and tenants who are completely oblivious to this requirement. I have been helping the tenants do their N208 applications for the 3 x penalty but worry about the Harvey Bamforth decision. I have read the judges view on the time scales and cant see the logic at all.

      Of the cases I see where notification has actually been given it tends to be 3 or 4 lines contained in the tenancy agreement, showing the scheme used and a contact number but is woefully short of the presecribed information rules, which I have to say do seem a bit excessive in a housing world that is trying to simplify things for all concerned.

      In addition, Section 213 and 214 seem quite clear in that they state ‘Also’ when it comes to giving notification and the ‘courts must’ when it comes to giving judgement. There is no ambiguity to it.

      Today I gave advice to a landlord considering entering the fray for the first time who decided against it when I explained to her the conditions of deposit protection, for no other reasons than it’s complexity and possible penalties. Dont get me wrong I think deposit protection is long overdue but 2 years in many of the people I speak to are just ignorant of the requirements.

      I have also recently met a lovely landlord who was horrified when he realised he had breached his obligations and was keen to pay the money in but where dpoes he go now? I know the DPS will take monies after the fact but the breach has already happened

  3. A new tenancy deposit on renewal of tenancy case. We submitted an N244 application on 18/8/09 in respect of a possession order which had recently been granted under section 21. We established that the deposit had been taken prior to the introduction of the deposit protection provisions being introduced on 6/4/07. However, the tenancy had been renewed in November 2007 and the landlord had not registered it with an approved scheme.

    DJ Silverman at Edmonton County Court set aside the possession order on the basis that the deposit should have been registered with an approved scheme when the tenancy was renewed in November 2007, so the landlord cannot rely on section 21 to recover possession as per HA 2004 s 215 (1). The case was Karacoc v Koc, DJ Silverman, Edmonton County Court 18/8/09.

  4. What FC is after is for it to be impossible for a valid s.21 to be served if there is not compliance within 14 days. However, either late compliance under s215(1)(a) or returning the deposit should mean a valid s.21 can then be served.

    • That appears to be correct, yes. The key point is that things have to be right at the date of *service*. Failure to comply initially does not prevent you from ever evicting a tenant, but it does slow things down rather.

  5. There is at least a possible argument that s215(1)(b) might apply where the deposit was protected outside the 14 day period in cases where the rules of the scheme themselves require timeous protection. As far as I am aware all of approved schemes have such a clause (though that was just the last time I had cause to check – I am happy to stand corrected if they have been rewritten since). Unfortunately all the cases I have either run or heard of where this point has been raised (these have been attempts, in possession claims, to argue that the failure to comply with s215(1)(b) creates a defence to a claim based on the service of a section 21 notice) have settled pre trial.
    I’d be interested to hear if there are any others out there who’ve met with success on the point – the nearest I’ve seen is Universal Estates v Tiensia [2009] Croydon County Court (unreported but noted in May 2009 Legal Action) which made the same point in connection with a 3x deposit claim.

    • We reported UE v Tiensia here at http://nearlylegal.co.uk/2009/05/tenancy-deposit-variations-on-a-theme/
      It runs completely against Harvey v Bamforth, of course. But if a DJ is prepared to take the Tiensia line that complying with the initial requirements of the scheme means compying with the scheme’s stated 14 day limit, then this should, of course, provide the defence of an invalid s.21 if the s.21 was served before the deposit was actually protected, information given and so on. But my reading of s.215(1)(a) is that a valid s.21 can be served if the deposit is held in accordance with an authorised scheme, regardless of whether compliance was late. I suppose that there may be an argument over the meaning of ‘or’ and s.215(1)(b) there, though.

    • Yes, but if the scheme itself requires (as an initial requirement) timeous compliance then it may be impossible to comply with those requirements late, regardless of what the statute might say.

    • Exactly what I was thinking – so what does the ‘or’ between 1(a) and 1(b) mean?

      E.g. late compliance so 1(a) is satisfied but the 14 day ‘initial requirements of the scheme’ isn’t. Does the ‘or’ mean both 1(a) and 1(b) must be fulfilled, or simply that satisfying either would be enough. If the latter, then late compliance = valid s.21 if served afterwards. If the former then late compliance would arguably mean a valid s.21 could never be served during the life of the tenancy – bm’s argument.

      Hmmm.

  6. Point on S215.
    Tenancy commenced and S21 served at the same time. Deposit paid before commencement of tenancy and service of notice, but less than 14 days before. Landlord does not have to comply with S213 yet, so the S21 notice was clearly valid when it was served, or ‘given’ in the language of S215.

    The landlord does not subsequently comply with S213. Landlord later applies for possession based on the S21 notice. Tenant defends on basis of S215(1) and (2). Landlord argues that S215 does not apply. S215 provides that no section 21 notice may be given at a time when the deposit is not being held in accordance with a scheme etc. Landlord argues that at the time the S21 notice was given it cannot be said that the deposit was not being held in accordance with a scheme, because the deposit did not have to be held in accordance with a scheme until 14 days had passed, S215(1)(a), nor were the initial requirements of the scheme not being complied with because the 14 days hadn’t passed S215(1)(b).

    There seems to be an argument that a S21 served at the commencement of the tenancy, so long as the deposit was not paid more than 14 days before the service of the S21, will always be valid because S215 deals with compliance when the S21 was given, and not ‘reliance’ on a S21. Any thoughts?

    • Hmm. Wouldn’t it still fall under 215(1)(a) – deposit is not being held in an authorised scheme? Granted 215(1)(b) arguably wouldn’t apply until after the 14 days, but there is no qualification to 215(1)(a).

    • You’ve misread s.215 I’m afraid.

      S.215(1) only permits a s.21 notice to be given at a time when the deposit is being held in accordance with an authorised scheme. It does not matter one bit whether the landlord is or is not in breach of any of the provisions of the act in so doing. A s.21 served at the outset just won’t work for that reason.

      Moreover, s.215(2) requires compliance with the “initial requirements” of the scheme (which will usually include various bits of documentary evidence being created and/or sent to the tenant) none of which can have happened at the outset of the tenancy. S.215(2) does not reference any time limits.

      You simply have to sort the deposit out first then serve the s.21 if that’s how you want to do it.

  7. francis – does the act say that?

    s215(1) says:
    1) If a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when—

    (a) the deposit is not being held in accordance with an authorised scheme, or

    (b) the initial requirements of such a scheme (see section 213(4)) have not been complied with in relation to the deposit.

    s21 notice can’t be given when a deposit is ‘not being held IN ACCORDANCE WITH AN AUTHORISED SCHEME’

    per s213, dealing with it ‘in accordance with an authorised scheme’ is defined as doing 2 things ithin 14 days: putting it into a scheme and providing details of this.

    i would argue that if it is within 14 days of receipt of deposit, short of having already absconded with the money, a landlord can’t be dealing with it other than in accordance with an authorised scheme because there isn’t any requirement before the end of the period. exactly the same goes for s215(1)(b).
    if it is ambiguous (and i don’t consider it is), why would one wish to read in an intention by parliament to stop s21 notice being given in that period when they could have legislated within the same act precisely to that effect?

    • But on that reading 215(1)(a) is superfluous, as (b) would cover all eventualities.

      S.213 addresses ‘dealing’ with the deposit. But 215(1)(a) doesn’t say ‘deposit is not being dealt with in accordance…’, it says ‘not being held’. Different terms, different effect. s.213 and s.214 mean that there is no claim by the T possible in the first 14 days, as s.214 relies on breach of s.213. But s.215 does not refer back to s.213, where, again, it could have done.

    • I agree NL.

      Put more simply s.215(1)(b) puts the matter beyond doubt. A landlord “has not” (note perfect tense) complied with the initial requirements of a scheme until they “have” complied with it. For example for the TDS this would require various steps to have been taken by the landlord, which they cannot have done at the very outset of the tenancy.

      There is no possibly inconvenience (apart from having to remember to do so) in serving the s.21 after compliance, it could even be appended to some of the documents required for compliance.

      My personal view is that this part of the act is rather well drafted (especially as statutes go nowadays) and one has to read it carefully because it is meant to be read tightly.

  8. different terms indeed – but i submit of similar effect. how can it be said a deposit is ‘not being held in accordance with’ etc during that 14 day period?
    215(1)(b) refers expressly to s213 and by mention of ‘being held in accordance with an authorised scheme’ s 215(1)(a) does so impliedly – and if it doesn’t, what guidance is there as to what it means? 213 is the section dealing with that point.

    i read (a) and (b) as complimentary and working differently – by (b) you have to have complied at the proper time and by (a) you still have to be complying whenever you seek to give notice.

    granted, this is not the view of an experienced practitioner, but i submit that it is a fair reading of the statute in isolation from any caselaw.

    • “how can it be said a deposit is ‘not being held in accordance with’ etc during that 14 day period?” – because, quite simply, it isn’t until it is.

      Note the 14 days is not a grace period in and of itself – it is 14 days within which to comply. One might comply within 2 or 3 days.

  9. My understanding of the act is that a landlord has 14 days to protect the deposit, and I agree that this is not a period in which the landlord does not have to protect the deposit.
    I agree with Francis in that if the landlord serves the notice at the same time as the tenancy agreement, without the deposit yet being protected, then the notice cannot be valid.
    I know this is repeating other peoples posts, but the deposits are either protected in a scheme or not, there is no ‘grey area’. If the deposit is protected in a scheme at the point of service, then it complies, if it is not, then is doesn’t.
    I am also of the opinion that there is nothing within the wording of the act that tenancies created pre April 07 and renewed afterwards should come under the scheme, as much as I would like that to be the case, just one reason why judicial guidance is desired.
    I have emailed DCLG staff responsible for the website advising that they are giving out advice that is unsubstantiated. The response I received was, and I quote, ‘Our guidance sets out what was intended when the legislation was passed. If the courts consistently interpret it in a different way it may be that there is a problem and that we need to review the legislation’.

Leave a Reply (We can't offer advice on individual issues)

This site uses Akismet to reduce spam. Learn how your comment data is processed.