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Deposit scheme – a new wheeze


So, I gave a talk on the deposit scheme post Localism Act on Tuesday morning, then surface to immediately find word of a new wheeze being tried by landlords. Just how quickly can one become outdated?

The Housing Act 2004 as amended by the Localism Act 2011 and in force from 6 April 2012 appears to say that if a deposit has not been protected within 30 days (or by 7 May 2012 for deposits taken before 6 April 2012), then no section 21 notice may be served unless the deposit (with agreed deductions) has been returned to the tenant or dealt with in s.214 proceedings by court order.

The new wheeze, being used by landlords who failed to protect, served a s.21 and are now seeking to rely on it, goes something like this…

The relevant parts of s.215 are:


(1) [Subject to subsection (2A),] 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) section 213(3) has not been complied with in relation to the deposit.


(2A) Subsections (1) and (2) do not apply in a case where—
(a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant, or
(b) an application to a county court has been made under section 214(1) and has been determined by the court, withdrawn or settled by agreement between the parties.

The argument being that (2A)(a) means that once the deposit has been returned to the tenant, (1) does not apply, with effectively retrospective effect, so any s.21 previously served is valid once the deposit has been returned, and the notice can be relied on in possession proceedings. (Accelerated proceedings couldn’t be issued in the meantime, as the landlord must declare the deposit protected or no deposit taken. Further, there would be the added complication of whether the s.21 was valid – as in served – at the date of issue of the claim).

Now, it has to be said that (2A) could have been more precisely worded – ‘ceases to have effect’, say, or even just ‘do not apply in a case once..’. But at the same time for a clause to have retrospective effect, one would expect to see that clearly specified. I would put myself on the ‘no retrospective effect’ side of the argument. For the issue of whether the tenant had in fact been served with a s.21 to turn on whether the landlord had at some later point returned an unprotected deposit to the tenant, strikes me as going against all certainty of notice.

But the fact that the opposite is arguable will no doubt mean some landlords succeeding on this point in the County Court.

I have an awful suspicion that this one will be destined for a higher court, just when we thought deposit scheme issues had been more or less sorted out.

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.


  1. JAC

    Unless there is a judge wanting to stick the boot into a tenant my guess would be that a judge would find it repugnant that a tenant relying on the notice he received not being a valid section 21 notice on the basis of s.215(1) and then finding out only a few hours before it expires that the landlord has “returned” the deposit and, immediately following expiration, issued an accelerated possession claim so that the tenant could have an order for possession against him within a few weeks of the notice becoming valid.

    Another argument ripe for higher court determination is the question of what has to be done to “return” the deposit to the tenant per s.215(2A)(a). Commonsense and Coltrane v Day suggests that it would be enough for the landlord to give a cheque for the full amount to the tenant whether or not the tenant deposits it and that the date of such giving (if during banking hours) would the date on which s.215(2A)(a) kicks in. What if the tenant argues that bank transfer or cash were the only acceptable form of payment as the cheque was likely to bounce (perhaps there have been previous financial defaults by the landlord) and so was not going to go to the trouble of depositing it and there is nothing in the tenancy agreement expressly stating that a cheque from the landlord is an agreed method of repayment of the deposit?

    • NL

      JAC, your first objection is where I was going. My sense is that you end up with a s.21 notice arguably void for lack of certainty of period and/or expiry date. T entitled to believe notice is void at time of service, as indeed it would have been, so I don’t see how this can retrospectively be turned into two clear months’ notice.

      I am less troubled about the means of ‘return’ of the deposit. I’m afraid I don’t see that T is in a position to demand return by any particular means, no matter how reasonably. If a cheque bounces, then deposit not returned, although granted that could cause entertainment if a s.21 served in the meantime.

  2. jjlandlord

    (1) applied at the time of service, so the notice is invalid.

    What is the basis for claiming that the wording of (2A) may have retrospective effect?

    Assuming that the notice might indeed become valid once the deposit has been refunded, surely the tenant would have a good point in defending that the notice must be valid for the notice period to run.
    That is, that the notice period only starts once the notice becomes valid.
    In such case, the landlord might start court proceedings too soon, in addition the expiry date on the notice may also turns out to be incorrect, making the notice invalid again.

    • NL

      s.215(2A) does not say s.215(1) & (2) – the s.21 ban – ‘ceases to have effect’ when the deposit is returned. It says they ‘do not apply’ where (not ‘when’) the deposit has been returned. Granted there is nothing to say that this would apply retrospectively, but it is possible to interpret that phrasing as meaning s.215(1) & (2) have no application to the case where the deposit has been returned, including in the past.

      I agree on the notice period issue.

  3. Trevor

    Is it correct that the tenant can refuse to accept repayment (by whatever means) offered by the landlord under 2A(a) and therefore avoid service of section 21 notice? The court will presumably want to know why the tenant is refusing an offer of full repayment. The tenant’s justification for refusing is that the protection schemes offer a costs-free dispute resolution service as an alternative to the county court (with its associated costs – even if only the issue fee etc). It is therefore in the tenant’s legitimate interest to ask that the deposit not be returned to him but protected in a scheme instead.
    If the landlord then protected the deposit is it correct that he would still not be able to serve a section 21 notice if that protection took place more than 30 days after receipt – because it was protected either too late to be in accordance with a scheme or too late to comply with section 213(3)?
    A county county court judge might balk at the idea of ASTs being effectively turned into assured tenancies because of the tenant’s refusal to accept return of the deposit but is that not answered by the tenant’s legitimate reason for refusing repayment? Is it worth a go….?

    • NL

      The hole in that cunning ruse is that if the deposit is returned (in full) there is no need of a dispute resolution service.

      And yes, no s.21 may be served if deposit protected and prescribed information not given within the 30 days of receipt deadline.

      However, if it is just the prescribed information not given in the 30 days, that can be remedied for the purposes of serving a s.21 at any time, just by giving the information to the tenant. Would still leave the landlord open to a s.214 claim though.

      • Trevor

        Sorry to labour the point, but on the question of the need of a dispute resolution service –

        Is there anything to stop a landlord returning the deposit in full simply in order to serve a section 21 notice, serving such a notice (and then issuing proceedings) and also demanding a sum in respect of alleged damage/dilapidations, and then suing for that amount in the county court (which the tenant would incur costs defending)? My suggested answer to that (rhetorical) question is “no”. And if that is correct then the tenant has a legitimate interest in refusing repayment and requesting that the deposit be protected, albeit late, in order to protect himself from that scenario. Does that save the cunning ruse?

        • NL

          My view – too distant. Of course the landlord could. The landlord could also ask for a fresh deposit, I think (which would of course have to be protected). Or the tenant could propose fresh deposit. But any alleged dilaps would probably be a small claim anyway.

          Look at it this way. What if the tenancy had not required a deposit in the first place. Could the tenant viably argue that there must be a deposit so T would get the benefit of the arbitration service? No. But T is in the same position here if deposit returned.

        • JAC

          I quite agree with NL’s points.

          Even though the tenant would probably lose with his argument, I suppose it is possible that if a tenant were to say something like “well he did not return the deposit because I reasonably refused to deposit the cheque received on the basis that I had good cause to think it would not clear” in support of a defence based on the landlord not being able to serve a section 21 notice under s.215(1) of the 2004 Act, then this might be enough to take the claim out of the accelerated possession procedure and for the court to list a preliminary hearing date.

          In turn, this could delay the time before a landlord gets back possession even though the tenant will, almost certainly, not make out his defence. Thus the tenant would gain an extra couple of months (or more) in the property. There would be a punishment in costs ordered by the court against the tenant I imagine but if the tenant clears off and cannot be found or is otherwise not worth pursuing this is likely to be of little benefit to the landlord.

        • Trevor

          I respectfully (and somewhat hesitantly) disagree with the points in your second paragraph…

          A tenancy that did not require a deposit in the first place is not a good comparator for one that did, whether or not it is subsequently returned. You are right that in the former case T could not viably argue that there should be a deposit in order that he gets the benefit of the arbitration service. But in the latter case (where a deposit is required) T could viably argue that he entered into the contract assuming that the deposit would be protected in an authorised scheme, thereby giving him the benefits of the cost-free arbitration service. He could further viably argue (I think) that had there been no deposit demanded in the first place he would have negotiated a lower rent in order to reflect his increased risk of exposure to costs in the only other dispute resolution service open to him – the county court.

          The tenant who pays no deposit is therefore not in a comparable position to one to whom a deposit has been repaid. The latter, I would suggest, should be entitled to refuse repayment of the deposit in order to gain the protection from costs that was part of the bargain that he negotiated with the landlord at the agreed rent. Had he known that the deposit was not going to be protected he could argue that he would have sought to negotiate a lower rent to take into account the costs risk he was taking on by it not being protected.

        • NL

          Trevor, they have got the deposit back. And I think the lower rent argument is a non starter. No deposit would usually be an argument for a higher rent, not a lower one.

  4. simplywondered

    am i missing the point (‘again?’ asks nl…)
    the word in s215(1) is ‘given’.

    on the cheque point i would say that until cleared there has been no return i accordance with the usual rule on cheques and funds.

    • NL

      Don’t think the word in s215(1) alters the argument, if s.215(1) retrospectively ‘doesn’t apply in the case’.

      On the cheque issue, I haven’t had time to dig into the current case law on that, but it is certainly the case that a cheque given on the morning of a hearing counted as payment of rent arrears…

  5. jesse

    Hi my query is that my deposit was not protected when section 21 was served. Section 21 ended 18th march and was given full deposit back on 21st in cash. Is the section 21 now legal ? As they are now proceeding to possession order ?

    • Giles Peaker

      My view is that is the deposit was not protected (or already returned) when the s.21 notice was supposedly served, the notice is invalid.

      The argument about ‘retrospectively’ validating the s.21 by returning the deposit hasn’t been tested in a court judgment that I know of. And my sense is it would lose. So the possession claim in your situation is very likely to be in trouble. You certainly have a defence that the s.21 was not valid when served.

  6. OMI

    Hi, does a landlord have to return a deposit in full if it wasn’t protected within 30 days of receipt in order to serve a valid s.21 notice or could he subsequently protect it and issue a new and now valid notice? Many thanks

    • Giles Peaker

      You are commenting on an old post. After April 2012, if the deposit was not protected within 30 days of receipt, it has to be returned ‘with agreed deductions’ before a s.21 can be served. But protecting it does not stop the landlord being liable for a claim for 1 to 3 times the deposit for failing to protect in 30 days.

  7. OMI

    Hi, thanks for your reply. Our landlord’s first s21 notice was invalid because they had not protected our deposit since 2007. The deposit was protected in April 2014 and a new noticed served, however it would seem that the new notice is still not valid as they have not returned the deposit in full ‘with agreed’ deductions. Is my understanding correct? Many thanks

    • Giles Peaker

      Yes, if protected after 6 May 2012. S.215(1) and s.215(2A) Housing Act 2004 as amended. Only other exception is where the tenant has brought a s.214 claim and the Court has dealt with it, or it has been settled or withdrawn.

  8. ELP

    A couple of things- section 213 specifies 14 days for the initial requirements- not 30 days- where is the authority for 30 days? Also -does that mean that even if a landlord protects a deposit after serving a section 21 notice -that the notice remains invalid- that they have to return the deposit before the notice is valid? So there is essentially no point in a landlord now protecting a deposit late in the day?

    • Giles Peaker

      You are looking at the HA 2004 as it was before being amended by the Localism Act 2011. You need the amended version, effective from April 2012

      And yes, there is no point in late protection after the 30 days, as of April 2012. LL still liable for a s.214 claim and can’t serve s.21.

  9. Jonathan

    Can a landlord try to claim for property damage when the deposit has already been returned (and check-out has not initially identified any issues) and tenant has left?

    • Giles Peaker

      Depends on the status of the check out, I’d guess.

  10. Sara

    Can a tenant refuse to accept the deposit back if the landlord is serving s21 after having protected the deposite late (after 30 days)?

    • Giles Peaker

      Not really. They could try to avoid it, but no legal basis for refusing.

  11. JS

    The section is postulated on agreement . I do not agree that a LL can simply return a deposit

    1 If the t/Ag requires a deposit and it has been paid it requires consensual variation of the tenancy for a deposit to cease to be payable and therefore for the T to accept repayment

    2 A tenant may have other good reasons why they wish the deposit to remain in the scheme – impecuniousity so they fear they could not otherwise meet the obligations at the end of the tenancy , other creditors who they would have to pay with this money , an abusive partner who might drink it away etc

    • Giles Peaker

      I diasagree, I’m afraid. The only agreement referred to is on the amount of deductions, and the wording is simply ‘the deposit has been returned to the tenant’, not that the parties have agreed the deposit is to be returned’. While there may be many reasons why the tenant may wish the deposit to remain with the landlord, given that there is no requirement for there to be a deposit, it is hard to see how that can determine whether the landlord can return the deposit.

      As the tenant could avoid a s.21 notice in perpetuity simply by refusing to accept the deposit back, I can’t see such a refusal standing up in court, no matter what the tenant’s reasons.

      [(2A) Subsections (1) and (2) do not apply in a case where—

      (a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant, or

      (b) an application to a county court [the county court] has been made under section 214(1) and has been determined by the court, withdrawn or settled by agreement between the parties.]

  12. JS

    The contract of tenancy requires a deposit – that is why one is paid – in the absence of a variation of that contract then it still requires one. It is a pre-condition to the LL being able to return the deposit that the contract has been varied otherwise how can he return it ? albeit that if a tenant accepts the deposit back it might arguably be treated as varied by conduct- but if the tenant stands on the contract how can they be forced to accept the return of the deposit ?

    Bad drafting again but I suggest it is much less straightforward than you suggest .

    Consider the second limb . if you adopt a literal approach a LL could agree a settlement requiring him to repay the deposit then not pay it after all but still assert he could serve a S21 notice .

    • Giles Peaker

      But then you are relying on the precise wording of the tenancy agreement, not HA 2004.

  13. JS

    Yes but the HA 2004 is built on the tenancy agreement – without the agreement and therefore payment of the deposit the scheme does not bite .

    I do not believe that HA 2004 was intended to allow LL’s to vary tenancy agreements unilaterally simply because it suits them . The tenant may refuse to vary . The fact this may make it difficult for the LL to recover possession is the LLs fault – he should have complied with the HA 2004 in the first place

  14. Luke

    landlord is in breach of the following provisions of the Housing Act 2004 (the Act):

    1. Failure to register original deposit within the stipulated time frame and failure to serve the prescribed information – Breach of section 213 (3) of the Act and breach of s.213 (6).

    2. Failure to provide prescribed information on periodic tenancy arising: breach of section s.213 (b) of the Act.

    we have been notified we are entitled to claim between £1300 and £3900 for the fixed term tenancy and between £1300 and £3900 for the periodic tenancy.

    we notified the landlord of our disappointment that the deposit had not been registered correctly and was over a month late and no prescribed information to date has been provided ( deposit paid and tenancy started in Oct 2012 ) we tried to settle this by agreeing fair compensation to be paid but was unsuccessful.

    on top of all of this we are currently dealing with extreme mould and damp issues in our property and structural defects are being caused by overflowing gutters and rotten soffits, we also have severe drainage issues creating foul smells, sinks not draining etc and the landlord has been aware of these issues for over 18 months but has refused to carry out the necessary works to resolve the issues regardless of us raising these issues on several occasions,

    we finally had enough and we are just going round in circles trying to get a result so took advice from a solicitor to start preparing a disrepair claim and notify landlord that we will start proceedings against her for the breaches of the housing act and disrepair unless she was willing to settle out of court.

    the landlord then served a section 21 (I understand that this is not valid due to the fact the deposit is still not registered correctly and we are still not in receipt of the prescribed information) the landlords solicitor is arguing that because the landlord posted a cheque for the amount of the deposit through our door that the section 21 would stand and a court date is set for 28/01/2014 for possession that we are having to pay to defend, we however returned the cheque immediately as advised by our solicitor.

    we have an 8 year old daughter and my fiancee is 7 months pregnant, we are scared that the landlord will win possession and we will be forced to move in a couple of weeks, with a baby on the way and over £1300 in solicitors fee’s and potentially over £500 to defend the hearing on 28/01/2014 this is causing huge amounts of stress and we really do not know what to do.

    can anyone shed some light on if the landlord has a chance of winning possession or not and should be starting proceedings against her for breaches and disrepair as soon as possible ??

    Thank you

    • Giles Peaker

      a) We don’t advise on people’s individual cases via the site.
      b) You’ve already got a solicitor.

      • Luke

        well that was helpful

        • Giles Peaker

          Sorry Luke, but we are very clear that we don’t offer advice via the site. We can’t.

  15. Graham

    Can a deposit be returned up to any point prior to a court hearing for possession under Section 21, or does this have to be returned before serving the notice and/or initiating court proceedings?

  16. Graham

    Thank you. Just to clarify, if the tenant accepted the return of the deposit, would they still be able to claim under s214?

    • Giles Peaker


      Some people have argued that because a returned deposit means that the court cannot comply with the ‘must order’ of s.214(3), no order can be made on the penalty either, but I think this is nonsense, particularly as s.214(3A) offers an alternative to 3.

  17. Graham

    Thank you. Is the landlord entitled to claim for repairs after returning the deposit?

    • Giles Peaker

      Return of deposit is with ‘agreed deductions’. So potentially arguable as waiver for further damages claim. And that is agreed deductions.

  18. Graham

    Many thanks for clarifying.

  19. Sarah

    Can I just clarify a quote in the above post (shown below) as am a little unclear.

    “The Housing Act 2004 as amended by the Localism Act 2011 and in force from 6 April 2012 appears to say that if a deposit has not been protected within 30 days (or by 7 May 2012 for deposits taken before 6 April 2012), then no section 21 notice may be served unless the deposit (with agreed deductions) has been returned to the tenant or dealt with in s.214 proceedings by court order.”

    Does this mean that if a deposit was taken pre-2012 and protected pre-2012 albeit late (eg 3 months after received) then a valid s21 notice can still be served now as they complied before the deadline date of before 07th May 2012?


  20. Sue

    Sorry Sarah, no, the 30 day deadline was preceded by a 14 day deadline (effective April 2007). So 3 months is still way too late!

  21. Tim

    Is it possible for a landlord withdraw an s21 claim after the judge has set a date for the hearing?

    • Giles Peaker

      Discontinue, yes. Not ‘withdraw’. Would mean landlord liable for any legal costs the tenant had incurred.

  22. Finlay

    Can a counterclaim under section 214 (2) and (4) of housing act 2004 be made at the same time as a defence to s21?

    • J


      • Finlay

        Thank you very much. Sorry, I forgot to mention that it’s with reference to an amended defence. The counterclaim was not submitted with the initial defence form.

        • Giles Peaker

          You’ll probably need the Court’s permission.

  23. Stephen.V

    Is it preferable that a counterclaim, (requesting the maximum penalty for not securing a deposit), proceeding from a defence should be allocated to the Fast Track rather than Small Claims?

    • Giles Peaker

      If it is alongside the defence, then it can’t be a small claim. If it is proceeding as a counterclaim alone, after a determination on the possession claim, then the answer is it depends. In particular, it depends whether the tenant has legal representation. Small claim = no legal costs on winning. If the tenant is in person, small claim offers them protection from the landlord’s legal costs if the tenant eventually loses.

      But it would be slightly odd for a counterclaim to be re-allocated to the small claims track when the case was initially a possession claim. Not impossible though and a Judge may well decide to re-allocate.

  24. Dan

    Will s21 be valid? Tenancy commenced in February 2012, renewed at various dates but no breaks – continued tenancy. Currently Statutory Periodic Tenancy. Deposit never protected or PI served – deposit returned to T by cheque, receipt given acknowledging that deposit has been received.

    • Giles Peaker

      Sorry Dan. we don’t give legal advice on specific situations via the blog.

      • Dan

        Giles, I’m not asking for legal advice – it’s purely hypothetical. Would a s21 be valid in such a situation.

        Yes, no or depends

        • Giles Peaker

          Remarkably specific for a hypothetical

          Anyway, Housing Act 2004 section 215(2A)(a)

        • Dan


  25. Caron Bryan

    Hi no excuse i know but my admin staff who no longer works here failed to protect deposit for a tenant.. i have now protected it but its very late ..2 months… i need to serve a section 21 in October as the owner wants house back ? ( im the agent) what do i do? Cant tell someone they cant have their house back because of admin error surely?

    • Giles Peaker

      Pay deposit to tenant (less any agreed deductions) or no section 21…

  26. Fredrick


    If landlord returns full deposit. Then Serves S.21 can landlord use N5B form for possession?

  27. Phillip

    Hi I am in the same position as Caron Bryon bond was deposited 30 days late, refunded an amount equal to the bond direct into the tenants account and sent a letter explaining that has she was in arrears and the L/L had agreed the bond could be refunded to help the tenant financially the tenant sent the money back to our account, stating this was not her bond as it was still held in the deposit scheme account. contacted the scheme and they said (very helpfully seek legal advice!!) We have issued section 21 and fear possession will not be granted. Anybody out there been successful or make any suggestions.


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