Initial Requirements and late prescribed information

Our thanks for this county court possession and deposit appeal case note to Josephine Henderson of Five Paper Chambers and Dambudzo Tenner of Duncan Lewis

Amak Property Investments (London) Ltd v Laura Sonny B01CL657. 15 September 2016, The County Court at Central London

This was an appeal of the dismissal of a set aside application following a possession order being made under the accelerated procedure without a hearing. Although it was accepted by both parties that Ms Sonny had filed a defence that the court had not considered, Ms Sonny’s application was dismissed as the DDJ felt there was no reasonable prospect of success in her defence. He had made a finding of fact on a disputed issue of whether or not the prescribed information had been served prior to the service of the s.21 notice. Having found that it had, he considered that Ms Sonny’s defence would fail. The appeal was heard at Central London before Recorder Klein.

Ms Sonny’s defence which had initially been found not to have a reasonable prospect of success, was based on the MyDeposits scheme rules (7th Edition) specifying that service of the prescribed information constituted an “initial requirement” of the scheme for the purposes of s.213(4) – Clause C1.5. The landlord had failed to serve the prescribed information within 30 days.

The landlord sought to rely on s.215(2) of the HA 2004 in that as the prescribed information had been served by the time the s.21 notice had been, the notice was valid and a possession order should have been made. Ms Sonny’s defence had no reasonable prospects of success.

Ms Sonny’s case was that per the scheme rules at clause C1.5, service of the prescribed information was an initial requirement of the MyDeposits scheme and the failure to comply with this initial requirement, within 30 days meant s.215(1A) applied and a s.21 notice could not be served other than if s.215(2A) applied – the return of deposit.

The appeal was allowed and Recorder Klein found that the application to set aside should have been allowed.

The claim itself was also considered and Ms Sonny’s defence was accepted; in that the MyDeposits scheme makes service of the prescribed information an initial requirement and so failure to comply attracted the sanction at s.215(1A) not s.215(2) – the landlord needed to first return the deposit (with agreed deductions) or have a claim in relation to it settled, before a valid s.21 could be served.

Comment

This is a first appeal to a Circuit Judge, and as such non-binding though possibly persuasive for District Judges. Nevertheless, I’m in two minds on this argument.

While s.213(4) states:

For the purposes of this section “the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.

and this would seem to catch service of the prescribed info under MyDeposits rules, it is also arguable that service of the prescribed info is not a requirement imposed by the scheme, but rather by s.213(5) and s.213(6) and as such is distinct from the scheme specific requirements, such that non compliance in 30 days falls under s.215(2), not s.215(1A).

But, as I’ve always thought, compliance with ‘initial requirements’ of a scheme was going to be more of a minefield than Tiensia made it seem, before the Localism Act changes.

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, Possession and tagged , .

15 Comments

  1. I find the reasoning here attractive.

    I can’t see there being any reason why the scheme cannot place a requirement to serve the PI in parallel, although i take the point that is the origin of the requirement.

    Basically, it’s within the gift of the scheme to lay down a requirement and if it so does then it’s an initial requirement for the purposes of the scheme.

    Not sure I agree with the binding nature of the decision even in the County Court at Central London. A decision by a CJ does not technically bind a DJ although is persuasive as far as I am aware. If I am wrong , and it does- then given that there is only one County Court it would bind all DJ’s.

    • Yes, fair point on the binding nature. Convention used to be DJs would follow decisions of the CJ in that Court. But of course, that has thoroughly broken down. Will amend.

  2. This strengthen my opinion that even with the Deregulation Act landlords must be very careful about what their deposit scheme requires when a new tenancy is agreed or a SPT is created.

    Anything a scheme states a landlord must do is an initial requirement and thus the deposit is not ‘protected’ in the legal sense if the landlord hasn’t complied.

    Landlords should always go through the schemes’ T&Cs with a fine comb before choosing which one to use.

  3. The Claimant did argue that service of the PI could not be an initial requirement imposed by the scheme as it was a requirement of the statute per s.213(5) and (6). However, we argued that there was nothing in the statute or otherwise to prevent a scheme from imposing as its initial requirement, what is already imposed by the statute. It came down to construction and what constitutes initial requirements at s.213(4). The heading of clauses C1 and C2 of the 7th Edition of the MyDeposits scheme is very clear in setting out that those clauses are the initial requirements of its scheme for the purposes of s.213(4) of the Housing Act. I agree that landlords/agents have to go through the scheme rules before choosing the scheme to use.

    There is a possible argument that might work which is that s.213(3) only requires a landlord to comply with the initial requirements in relation to the deposit (ie the physical deposit) and relying on the CoA decision in Tiensia as to initial requirements being those steps to protect/secure the deposit, service of the PI was not such a step. But this argument is not necessarily fail proof as obviously you could still argue that service of the PI does relate to the protection/securing of the deposit.

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  5. I think there is probably another area here. Although Giles has used the more familiar PI description, the initial requirements in the 7th edition (changed in the 8th edition) actually makes serving the “DPC” an initial requirement. The DPC is defined at the top of the document (page 3) as “A certificate produced by us confirming the Protection of the Deposit.” This might make trying to argue that it does not apply to the PI as the PI is defined in statute more difficult. This would seem to be very much about the physical money, even if the DPC in practice seems to include contents from the prescribed information!

    • The specific issue in this case was ‘the prescribed information’. I agree that the same issue would arise regarding any other documents that the ‘initial requirements’ of the scheme required to be provided to the tenant within a set timescale.

  6. If PI is given in a standard form at the start of a tenancy where the letting agent is employed on a “letting only” basis, and the landlord subsequently fails in his duty to secure the deposit within 30 days, is the PI valid if the deposit is secured 3 months later in the originally stated scheme?

    • Valid for what purpose? Late protection means a deposit claim regardless of when PI served. Late protection also means no s.21 unless deposit returned, at least during the initial tenancy (if started post If deposit returned then validity of PI is not an issue for a s.21.

      Otherwise, depends how you interpret ‘the authorised scheme applying to the deposit’. It seems to me to be arguable either way – that it is the authorised scheme in which the deposit will be protected (so PI served before protection ok) or the authorised scheme in which the deposit has been protected (so PI can only be served after protection). There is nothing decided on this. My leaning would be to PI before protection being OK, so long as it turned out to be right of course. The legislation does not expressly forbid this and there would be policy reasons for it to be OK.

  7. Standard PI templates give the get out clause of “accurate to the best of my knowledge and belief”. But surely if the deposit is secured 3 months after receipt, the PI needs to be served again in its entirety? If the deposit claim is acknowledged and dealt with by, let’s say securing it with the originally proposed scheme and financial redress before court. How can the PI be valid 3 months after the deposit is secured? The deposit certificate itself would surely weigh heavy on any defence?

    • It is a simple question. Can the PI be served before the deposit is protected? The statute isn’t clear, but I suspect the answer will turn out to be yes.

      In the only circumstances in which this would matter – late protection during previous term of a tenancy for which a new (renewal) tenancy was then entered into – the late protection doesn’t matter (for the subsequent tenancy) by way of statute – though a deposit penalty claim would still be possible, of course. If the PI can be served before a deposit is protected, there is nothing in statute, or the PI Order, that would mean it is invalid in those circumstances. So, it all turns on the meaning of ‘the authorised scheme applying to the deposit’, as per the deposit order and the Housing Act 2004.

    • My ultimate question is “intent”. Can PI be served where there is no intention to protect the deposit? Ultimately, the deposit becomes protected due to the fact the tenancy is “live” and ongoing. But is the original PI valid when the construct of the contract was never adhered to? The deposit was not protected as explicitly stated, in said scheme, surely invalidates the PI proffered?

      There are many cases where the deposit was secured and PI not given. None at all where PI was given, but subsequently not followed through and the deposit not secured? Therefore, the agent is fully aware of the need to serve PI, yet fail to secure the deposit? PI and deposits are two separate issues liable to two separate penalties. Serving PI and failing to secure the deposit, surely invalidates the PI and has to be served within 30 days of the “actual” deposit?

    • It is simply a matter of whether PI can be served before deposit is protected. The answer isn’t clear from the statute, but I suspect yes. I could be wrong. Will have to await a judgment.

      There is nothing about intent in the statute. It just doesn’t matter. (Except maybe in mitigation on penalty in deposit penalty claim)

  8. In a similar situation where the deposit had not been protected before the start of the tenancy, I was advised by the RLA that the simplest option was to forthwith return the tenant’s deposit and the tenant would leave.
    Not clear though if this would help in a situation where the Tenant was determined to remain and was simply using the prior registration clause to remain in the property indefinitely.

    • I think you may have misunderstood the RLA advice (or their advice was wrong). If the deposit was not protected within 30 days of receipt, then it would have to be returned before a section 21 notice could be served.

      It is certainly not the case that if you returned an unprotected or late protected deposit, the ‘tenant would leave’.

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