In advance of the brace of Court of Appeal hearings on the tenancy deposit scheme (TDS), contained in sections 212-4 and Schedule 10, Housing Act 2004, and after the High Court decision in Draycott & Draycott v Hannells (discussed with additional, important comments here), I have been spurred on to think about the original purpose of the TDS for two reasons: first, because it places the scheme in context (as Baroness Hale, in academic mode, said, “in law, context is everything”); and second, because it may be that, in finding its underlying purpose, we might also find the underlying meaning of the provisions. I begin expansively and then narrow the discussion down.
When the history of the private landlord comes to be written, it will be one in which, for much of the twentieth century, there was decline in the face of rising aspirations to home ownership and the rise of publicly provided housing. That decline occurred for a number of reasons, some economic, some political, and (forgive the academic-speak) some discursive. The revitalisation of the private landlord since the early 1980s was the product of a recognition that home ownership levels were unlikely to be sustainable in the long term and the new social sector was occupying a more marginal role. Despite successive government schemes to incentivise the growth of the “new model landlord” (as John Patten put in the mid-1980s), such schemes were largely unsuccessful; growth has occurred most notably through the industry development of “buy-to-let” mortgages. The private landlord has become responsible in some areas for providing accommodation to increasing numbers of vulnerable households, which has lead to the sector becoming indistinguishable from the social sector in recent years.
A history is important for three fundamental reasons: first, the private landlord interest has coincided with that of successive governments (of whatever hue), accompanied by the rise of landlord associations, which have the ear of those governments (and others – remembering, of course, that the pre-action protocol on rent arrears does not apply to private landlords, unlike its earlier form which was the subject of consultation); second, those governments have taken a rather simplistic view about the decline of private landlords, assuming that the decline was a product of over-regulation, a regulation-as-burden argument (hence the shift to the assured shorthold as the default tenancy in the Housing Act 1996); third, most private landlords are “sideline” in the sense that they have few properties and are, by and large, amateurs (in legal knowledge terms) – renting is a modern cottage industry. They have become a legitimate target for government intervention, partly through the receipt of HB and partly because of a policy line that has been drawn between the “good” and the “bad” landlord.
At times, though, the dissenting voices about the growth of private landlordism have raised sufficient concern to make government (at least) listen. One example is Debbie Crew’s campaign against retaliatory eviction; the second example is the TDS. My suspicion is that they will be written out of the history of the rise of the private landlord or regarded at best as a blip in their progress.
The dissenting voices about tenancy deposit, lead by the CABx, were able to demonstrate the considerable injustice of the then purely contractual scheme, which caused plentiful dispute and this was also shown in various household surveys. This had a particular impact on the more marginal parts of the sector, in which the deposit is recycled into a new tenancy. The government’s response was to set up a steering group of landlords and tenants together with a voluntary TDS in 2000 which they evaluated (or rather, Julie Rugg and Mark Bevan evaluated). The scheme failed, partly because of disinterest by landlords, although the landlord associations did set up their own TDS. The government hoped that the Law Commission would resolve the problem, but the failure of the voluntary scheme and the continued existence of the problems, together with the power of the dissenting voices, meant that the government decided to amend the Housing Bill after its first reading. Rugg and Bevan, however, had cautioned that even bodies representing tenants “… were agreed that the issue of deposit mismanagement is not so pressing to to require the introduction of a full-sector regulatory framework. The widespread lack of a perceived problem with deposits by landlords and agents is likely to bring such a framework into disrepute and may lead to extensive – and expensive – non-compliance” (at 6.3.18).
Having decided to introduce amendments to the Bill at quite an early stage, in retrospect it is unfortunate that the government only amended the Bill regarding the enforcement provisions on 20 October 2004, on the third (and final) day of the Report stage in the House of Lords, responding to concerns raised by Lord Best (of jrf fame). The lobbyists had been in full cry on both sides – Shelter and the CABx had issued briefing notes; Baroness Gardner had sat next to the chair of ARLA at lunch that day. Lord Bassam, a government whip (and formerly a leader of the squatters’ movement), introduced the amendments (see HL Debates, vol 665, col 884) and said (my emphasis)
… streamline the proceedings for tenancy deposits to make it easier for tenants to enforce sanctions against non-compliant landlords … A landlord or a letting agent on his behalf now has 14 days from receiving the deposit to ensure that it is safeguarded by a scheme, that he has complied with the initial requirements of the scheme and to provide a tenant with information about that scheme and its operation. Until this is done, the landlord is unable to regain possession of the property using the usual “notice only” grounds for possession.
Additionally, we have cut down the number of court hearings required to enforce the provisions. If the landlord or his agent has not complied within 14 days, the tenant can now apply for a court order requiring the landlord to either return the deposit or pay it into a custodial scheme and an order requiring the landlord to pay the tenant an amount equivalent to three times the deposit. We believe that this provides a greater certainty for landlords that they will face a financial penalty if they do not comply with the provisions.
We have put something in place in legislation which will not only stand the test of time but, more importantly, will match the very understandable concerns over tenancy deposits expressed by tenants – and to a degree by landlords – over a considerable period of time. …
We have introduced these amendments with the aim of dealing with the worst abuses in the private rented sector. Obviously those abuses have a disproportionate effect on the poorest members of our communities.
So, it seems that Lord Bassam (at least) was clear about the extent and purpose of the enforcement provisions. That he was incorrect about their extent – my sense is that the cases which the courts have been considering, and will consider, are not at the “worst abuses” end of the spectrum – does not diminish his understanding of their purpose. That understanding was that the provisions created certainty as regards enforcement; certainty was provided by the 14 day rule and the financial penalty should be the result , as a matter of course. That makes sense if one is seeking to penalise the bad private landlord, and to discipline them away from amateurism. Of course, you lawyers have since made hay out of badly drafted provisions which were not the subject of full parliamentary scrutiny, and exposed the drafting weaknesses in provisions ostensibly designed not just to protect tenants but penalise landlords. As a result, I side with JS and against my NL colleague, David Smith; NL’s justifiable anger at the drafting of the provisions as interpreted by Tugendhat J in the Draycott case provide an appropriate footnote to the overly self-laudatory comments by Lord Bassam.