Via Jonathan Starr of Switalskis Solicitors comes this account of a PRS possession/deposit case. The account is by Mr Starr, slightly edited. Although only a county court case, so non-binding, there are some interesting points about the return of deposit via a deposit scheme being inadequate for a s.21 to be valid.
Ahmed v Shah, Bradford County Court. June 2015.
The Defendant is a tenant under an assured shorthold tenancy which started in February 2014. At the beginning of the tenancy a deposit of £600 was paid. This deposit was not protected until the 12th August 2014 and the prescribed information was not served.
The first set of proceedings were issued in October 2014 relying on a section 21 notice allegedly served at the commencement of the tenancy. These proceedings were successfully defended on the grounds that the service of the section 21 notice was disputed but in any event the section 21 notice would have been served prior to the protection of the deposit and as such would be invalid as per Section 215(1) Housing Act 2004.
The Claimant then sought to return the deposit through the DPS repayment system. The Defendant did not accept the return of the deposit. The Claimant served a fresh section 21 notice in October 2014 and proceedings were issued in February 2015. A defence was filed on the grounds that the deposit had not been protected within the 30 day time period and had not been returned.
In June 2015 the Claimant sent the Defendant a cheque for £600, claiming that he had now returned the deposit.
The matter went to trial and was heard on the 29th June 2015 by Deputy District Judge McLaughlin where it was accepted by both parties that the prescribed information has not been served and that the Defendant had not accepted the return of the deposit through the DPS.
The claimant sought to argue two points;
1) The deposit should be deemed to be returned as it was open for the tenant to accept it
2) In any event the deposit had now been returned and as such Section 215(2A) would bite and Section 215(1) would not take effect
Both points were disputed by the Defendant.
The court found that there was no evidence before the court confirming that the full deposit had been made available to the Defendant for her to accept. The Claimant had relied upon emails sent to the Defendant by the DPS notifying her that the landlord was seeking to return the deposit. These emails did not specify that it was the full deposit and there was no evidence from the letting agent stating that it would have been the full deposit repaid. As such the court found that the deposit had not been returned.
The court also found that returning a cheque does not retrospectively validate a section 21 notice.
Where there has been a statutory contravention of the Housing Act by virtue of non-protection of tenant’s deposit/no prescribed information within the applicable limit, for a tenancy that began as a fixed term one on a date that is now outside of the 6 year ‘statute of limitations’, but became on-going/periodic, would a landlord still be liable for a statutory penalty in respect of the new/periodic tenancy that began on a date not outside/disqualified by the 6 year rule, and would any such liability/statutory penalty that might be applicable, apply only once (i.e. to the first new/periodic tenancy not disqualified by the 6 year rule), or be repeated in respect of each subsequent new tenancy?
Yes. But no further repetition if remained statutory periodic.
The express provision in a tenancy agreement for a deposit and its protection in an accredited scheme may be to the mutual advantage of both landlords and tenants and, this notwithstanding, in such circumstances would be a matter the subject of formal/legal agreement between them. Landlords sometimes act unilaterally to return tenancy deposits – in some cases against tenants’ wishes – citing, inter alia, deposit administration costs and/or so as to avert/repair issues relating to the validity of S.21 notices. I would therefore be interested to hear of (any) circumstances in which a Court has determined that a landlord is, or is not, acting in contravention of a tenancy agreement by returning a tenancy deposit in this way?
Heard of people trying to argue about return of deposit on that basis, but won’t stand up. If deposit returned in fact, statutory condition for s.21 met.
I recognise the applicability of S.215 (2A) and the return of a tenancy deposit as ‘repairing’ S.21 in circumstances in which a deposit hasn’t been protected/protected within 30 days, but cannot accept that an unlawful act (repaying a deposit that is required to be protected in a scheme under a tenancy agreement) should be allowed to make lawful, circumstances that are unlawful, being precluded by S.213. Under S.215 (2A) a landlord has the route of returning a deposit to a tenant as a means of restoring his rights under S.21 (otherwise precluded by S.213), but (surely) not if such an action contravenes a legal agreement between the landlord and the tenant and itself constitutes an unlawful act? Otherwise is the law not condoning an unlawful act being made lawful by another unlawful act? Moreover, the treatment of a tenancy deposit does not have to be prescribed in a tenancy agreement (making such a matter of mutual agreement between a landlord and a tenant) and where this isn’t so, a landlord would be able to exercise his rights to return a tenancy deposit under S.215 (2A).
Statute overides contract. I’m afraid that is the end of that.
Remember that returning the deposit does not prevent a s.214 claim for breach.