Tenancy Deposit Protection Eviscerated

Tiensia v Vision Enterprises Ltd (t/a Universal Estates) [2010] EWCA Civ 1224 (11 November 2010)

This is the long awaited Court of Appeal decision on tenancy deposit protection. It is a conjoined appeal of Universal Estates v Tiensia and Honeysuckle Properties v Fletcher.

The facts of the two cases are very similar. In both cases the landlord had issued proceedings for possession for arrears of rent. The tenants had in both cases counterclaimed on the basis that the deposit was unprotected and the landlords had then put the deposits into the scheme operated by Tenancy Deposit Solutions Ltd (trading as MyDeposits) prior to the hearing of the tenant’s claim in Court.

The deposits were obviously protected late (outside 14 days) and arguably failed to fulfil the initial requirement of the MyDeposits scheme to protect within 14 days of receipt. There was a further point as to what date the Court should consider compliance by the landlord with protection, at the date of issue of claim, or at the date of hearing.

In short the Court of Appeal held that the case of Draycott v Hannells Lettings (which we reported on here) was correctly decided for much the same reasons that were given in that case. In short there is no penalty within the legislation for protection later than 14 days but rather the penalties apply for failure to protect at all. The further point in Draycott that the 14 day rule within the DPS scheme could not be an ‘initial requirement’ of the scheme was also found to be correct and the Court of Appeal went further by stating that no scheme can impose a time limit on protection as an initial requirement or at least not one that bites in a legislative (as oppose to administrative) sense.

Where the Court of Appeal went (much) further is that it held that the appropriate point where the Court should consider the protection status of the deposit is when it comes before the Court for a hearing and not at the date where the proceedings are issued. In other words the landlord has until the date of a hearing to correct his failure to protect the deposit properly.

To a large extent this judgement acts to “drain the legislative scheme of all effect by reducing the remedy for non-compliance to near-impotence” to use the words of Lord Justice Sedley (who gave a dissenting opinion). Lord Justice Rimer (who gave the leading opinion, Lord Justice Thorpe assenting) gave some (very cold) comfort to tenants by asserting that if they were forced to go to Court to compel a landlord to protect their deposit then they should be able to recover their legal costs. However, he gave a clear warning against tenants ‘ambushing’ landlords by issuing proceedings without first complying with pre-action directions and sending a letter of claim.

All three justices stated that their decision was not one which accorded well with what they suspected had been intended by Parliament but the majority concluded that the drafting left them little choice. We have considered the original purpose of the legislation here. At this stage the onus is now on Parliament to reconsider the legislation and probably amend it. Whether that will actually occur is anyone’s guess.

In summary then, the position is that a landlord can protect a tenant’s deposit at any stage right up until the steps of the Courthouse and serve them with the prescribed information and escape the relevant penalties. The Court has not ruled on what the position is once the tenancy has ended and whether a landlord can protect the deposit at that stage and still escape liability. This issue remains one which needs a higher court decision.

However, (to throw in my two cents worth) it seems to me that it must be an implied condition of any scheme that the deposit which is being registered with it is one for a tenancy that is actually in existence at the date of registration otherwise the schemes become unworkable in an economic and business sense, particularly the insurance backed ones. I will leave you with that thought.

About D

D is a solicitor specialising in landlord and tenant matters with a London firm.
Posted in Assured Shorthold tenancy, Deposits, Housing law - All and tagged , .

29 Comments

    • The RLA were, in effect, behind the Honeysuckle Properties case. Not so sure about getting the money back. The order for payment of the damages is valid unless and until set aside or overturned on appeal. Most landlords are, I suspect, well out of time for any appeal and a set aside seems unlikely unless there are some very odd facts

  1. I agree with J. I can’t see how a landlord could get their money back save by way of appeal and the vast majority would be out of time.

    In fact, having thought about it overnight I am not sure that this case is the great panacea for landlords that the RLA claim. I am not convinced it has any application in a case where the tenancy has ended and the landlord has never protected the deposit which forms a large number of claims.

    There also remains the failure to provide prescribe information which is a common issue and the failure to provide information to all relevant persons, another common failure.

    To some extent I agree that the legislation has been torn apart by this but, at the end of the day, the objective was to secure protection of the deposit and in this case those deposits were protected, albeit late. The RLA’s windfall argument has force, however much that seems like bad landlords escaping their just desserts.

    • It strikes me as decision horribly reminiscent of CA attempts to sabotage the Rent Acts until Street-v- Mountford came along .

      I should be surprised and disappointed if the Supreme Court did not give PTA – indeed in the light of LJ Sedley’s dissent the CA might even do so.

    • If permission is sought, I’d be very surprised if it wasn’t granted, particularly given the strength and terms of LJ Sedley’s dissent. That said, I could also imagine a refusal, coupled with a re-iteration of the CoA’s view that Parliament needs to re-assess the legislation.

    • Isn’t this the problem? The legislation appears to leave one with either the ‘tenant windfall’ position’ or, as per the CoA, an insanely complicated and expensive way for the tenant to enforce the LL’s obligation. A part 8 claim, for heaven’s sake! Hardly lay person friendly. Why bother with a claim? Why not just apply for an injunction requiring the deposit to be protected? Quicker, for starters.

      But the ‘what if the tenancy has ended’ is the great unanswered question, I agree.

    • There is a case pending in the CA on this (tenancy ended) point. I forget the name. Permission to appeal has been granted. Counsel are Laura West at Arden Chambers and Kevin Gannon (Pump court?)

  2. Is it the job of the Supreme Court to re-write bad law (where s.3 HRA does not apply)? I thought that was Parliament’s job?

  3. I was rather disappointed to see that the majority rejected the suggestion that the position should crystallise on issue of the claim, purely on the basis of the tense used in the language of the section. It’s almost as if they wanted to eviscerate the protection afforded.

  4. “Eviscerated” seems a bit strong to me. That would suggest that the prupose of the legislation was to produce lawyers arguments about windfalls and punishing landlords for mistakes rather than to improve the problems that had been identified with residential tenancy deposits.

    There is still a fair bit of protection for the tenant that was not there before the Act came in. The landlord cannot serve a section 21 notice if there has not been compliance and if the landlord does not protect the deposit then the penalty still applies. This is surely what the Act was intended to do – make landlords look after the deposit properly so that the tenant can ask for any disputes to be dealt with in simple scheme. This all still applies after Tiensia. If the deposit has not been protected, all the tenant needs to do is threaten court proceedings and most landlords will fix the problem quickly and if they don’t then they can still be fined.

    What you don’t have, though, is a tenant windfall or the possible absurdity of a landlord being forever unable to get possession of property back under s.21 if he serves the tenancy deposit required information a day late. I’d be surprised if the decision is changed in the Supreme Court should it get that far. This is one for Parliament to fix rather than the Supreme Court.

    As for the position where the tenancy has ended and the tenant issues a claim for 3x deposit for failure to comply with the Act, I cannot see why the result would differ from Tiensia if the deposit has not yet been returned to the tenant as the wording of s.214 does not indicate that it only applies while the tenancy subsists. If, however, the deposit has been returned to the tenant then I would have thought that the court would consider the exercise otiose and rely on the qualification “as it thinks fit” in s.214(3) to conclude that there is no purpose served in penalising a landlord where the tenant has already been paid the deposit in full. I suppose that, like in Tiensia, the time for paying the deposit to avoid such penalty would be right up to the hearing date though the landlord would have to stump up the tenant’s costs.

  5. Permission to appeal was refused by the Court of Appeal in these quite positive terms. Appeal is being considered at the moment by Ms. Tiensia
    “Permission to appeal to the Supreme Court is refused. The court records, however, that it recognises that the issue raised by the appeal (as to the answer to which the court was not unanimous) is one of general public importance and that the Supreme Court may regard the issue as meriting its considerationon on a further appeal”
    best wishes
    James

  6. Much obliged for that. While I’m on, does anyone have the name of the ‘post-tenancy’ s214(4) claim case in the CA?

    • On the Court of Appeal’s tracker service this is still awaiting a decision on the papers.

    • Do you have any idea when the appeal decision will be handed down on Hashemi v Gladehurst.

  7. One wonders what is the point of the CA having a power to give permission it is difficult to imagine a clearer cut case for the granting of permission to the SC.

  8. Why cant the tenant pay the deposit straight to the DPS where it can protected for the Landlord?

    • Because then the landlord or agent hasn’t received the deposit from the tenant.

      It would be entirely possible to have a scheme where the tenant protected the deposit, but a) that isn’t the scheme we’ve got and b) how would you enforce it?

  9. Re: Hashemi v Gladehurst – I’m in the same position and don’t know if I should take my landlord to court given the Tiensia ruling (quoted to me by the landlord [serving J.P). My tenancy has ended, no rent arrears. Also, does the new legislation introduced on 6th April 2012 apply to my case? – if not, seems the landlord can have his cake and eat it!
    Thanks for any response/advice.
    P.S. I am not in the legal profession so excuse any dumb questions.

    • Scyoyo – We can’t advise on individual cases via the blog I’m afraid. Whether the new legislation applies all depends when your tenancy ended. I can only recommend seeking advice from Shelter or a CAB on the details.

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